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More than 300 apartments in the new Almajdiah Residence complex in Riyadh were sold in just a month for cash, without the company even having to advertise.
This is Saudi Arabia, the world’s largest oil exporter, so it’s no surprise that the property market is red-hot as the proceeds of a surge in energy prices flow through the economy.
But Almajdiah chief executive Abdulsalam Almajed says the race for 1 million riyal ($266,400) homes also reflects something else: the social and economic change transforming the kingdom, accelerated by the crown prince’s overhaul program.
“There is a change in mindset,” said Almajed, who heads a family-run business as some Saudis embrace the more open lifestyle his firm caters to. “There is beautiful creativity in Saudi designs today.”
While de facto ruler Mohammed bin Salman has centralized power and stepped up political repression since being installed by his father, King Salman, in 2015, he has also lifted or eased restrictions on entertainment and how men and women can mix. and tries to limit oil dependence.
Ten years ago, many property owners wouldn’t even rent to women who needed the approval of a male guardian for many life decisions. Today, women are entering the job market in greater numbers and 30% of Almajdiah buyers are women who are acquiring investment properties or owning their own home.
They are helping to build an economy transformed by energy markets. With much of the world worried about spiraling inflation fueled by Russia’s war in Ukraine and potential recessions, oil averaging more than $100 a barrel this year means Saudi Arabia’s economy is the fastest growing in the Group of The 20s.
Gross domestic product expanded 11.8 percent in the second quarter as the non-oil economy grew 5.4 percent and is now bigger than it was at the end of 2019 before the pandemic hit.
State energy company Saudi Aramco reported the biggest quarterly adjusted profit of any listed company globally. Billions of dollars have flowed into Saudi Arabia’s coffers and boosted government investment, boosting sentiment in the private sector reliant on government contracts.
Capital spending jumped 64% year-on-year in April-June as the kingdom ramps up construction, including malls and parks, as well as grandiose plans for a new city built from scratch and a luxury tourism development on the Red Sea. Total spending was 16% higher, although the initial budget forecast for this year will fall.
Summer usually sends the Saudi elite to cooler climes in Europe, but Riyadh’s newest high-end restaurants are packed. At Coya, a Latin American chain, the most popular dinner spots — from 8:30 a.m. to 9 p.m. — are fully booked a month in advance.
Combined cash withdrawals and point-of-sale transactions, an indicator of consumer activity, rebounded, rising 9% year-on-year in June after a record high in March. Inflation last month was 2.7%, about a third of the level in the US or the eurozone.
The Treasury is trying to break the habit of following oil and cuts by channeling stimulus through sovereign wealth funds to long-term projects such as electric vehicle manufacturing and tourism.
The economy is expected to grow 7.6 percent this year, but growth could fall to 2.5 percent by 2024, according to a Bloomberg survey of economists. Crude oil is now around $90 a barrel as global fears of economic downturns and the potential for more supplies from Iran if its nuclear deal is resurrected continue to hover over the market.
“If there was another crash in oil prices, there would be another slowdown in activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “But a number of positive factors are coming together at this point.”
Almajdiah caters to affluent professionals who want open-plan homes with an abundance of natural light. Many Saudis previously preferred houses with high walls and small windows to preserve privacy. But social opening, along with smaller families and tighter budgets, is changing that.
The developer’s latest complex is built around shared courtyards and features cafes, gyms and a children’s room.
The style reflects high-end housing in Dubai, the regional hub that Prince Mohammed wants to compete with as he announces plans to double Riyadh’s population and attract millions of expatriates.
That’s the key to Almajed’s optimism, which has helped the real estate developer he heads start planning an initial public offering. The more people, the more apartments they will need, he said.
(Adds company’s IPO plan in last paragraph)
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