Neom still tops Saudi investors' choice for homes - but there is competition

Dubai: Saudi investors are willing to spend big on a home – and ideally one that is part of the Kingdom’s giga-projects. And Neom seems to be a particular favourite with these property buyers, with many willing to spend SR20 million and over on their new homes.

Saudi nationals with monthly incomes of SR50,000 and over have the ‘greatest appetite’ for such investments, according to findings by the real estate consultancy Knight Frank. For those individuals bringing in a monthly income of SR80,000 plus show a marked preference for SR20 million homes.

When it comes to buying property in giga-projects, one in five respondents in the poll said they would commit more than SR4.5 million. When their choices are outside of giga-projects, that investment size narrows to SR1.5 million on average.

Saudi Arabia is currently building multiple ‘giga-projects’, known as such for the kind of scale  and ambition that goes into it. This, of course, includes the mountain based Neom and ‘The Line’, which will have two 170-kilometer long 500 metre high towers. There is also Jeddah Central and more.

Indeed, more choices are opening up for home buys within giga-projects other than the Neom. It's showing in buyer preferences too.

“While Neom continues to take pole position in the hearts and minds of Saudi nationals as a location they would like to live in, its popularity has decreased from 84% in 2023 to 17% this year," said Faisal Durrani, Knight Frank's Partner - Head of Research for MENA markets.

"There are likely to be a range of reasons for this, including the emergence of other giga-projects over the last two years, perceptions around households’ ability to afford to own a home in any of Neom’s subprojects, a lack of ready-to-move-into homes, a lack of homes actually on the market to purchase, or a combination of the above.

"These factors present a clear blueprint for how Neom’s developers can boost absorption rates once homes are made available to purchase.”

There could be about SR2.75 billion in 'potential' private capital among Saudi nationals and Saudi-based expats 'ready to be spent on residential real estate within giga-projects', says the Knight Frank report.

"While 42% of respondents are prepared to spend a maximum of SR1.5 million on a home outside a giga-project, respondents are ready to commit higher budgets to live in one of the iconic giga-projects," the report adds.

"Overall, the average giga-project budget stands at SR3 million, compared to SR2.2 million for a non-giga-project home."

There have been reports about Saudi Arabia scaling back on how some of the giga-projects would shape up. Even then, there's plenty that would still emerge from whatever landscapes they are being built on.

“We understand the pressures faced by (Saudi) giga-project developers in delivering the quantum of real estate planned by the end of the decade," said Harmen de Jong, Partner, Strategy & Consulting at Knight Frank.

That's '1.04 million homes, 7.7 million+ square metres of offices, 7.4 million+ square metres of retail space and 362,000 hotel rooms, all of which are putting pressure on resources, such as the availability of skilled/unskilled labour and raw materials, not to mention the surging cost of land'.

At the same time, buyers will also need to be patient about when handovers of their homes will take place.

The Line has pushed its way to the 'top of Neom homebuyers’ wish-lists'. "The popularity of The Line is highest among Saudi nationals and Saudi-based expats with monthly incomes of SR10,000-SR20,000 and SR20,000-SR30,000," the report finds. "29% of those with monthly incomes of SR40,000-SR50,000 would like to own a home at The Line."

According to Durrani, investor perception about The Line is that it a 'mass-market project'. "The Line has positioned itself as a sprawling metropolis, albeit a linear one, which may not necessarily appeal as much to wealthy households..."