Red Sea homes priced up to $40 million in Saudi Arabian property boom

Riyadh: Luxury villas and apartments are sprouting up on an archipelago in the Red Sea just off Saudi Arabia’s shores, becoming the latest symbol of the boom in the kingdom’s property market. 

The new homes — some of which are being priced as high as $40 million — are being built on a ring-shaped island by Red Sea Global, a developer owned by Saudi Arabia’s $1 trillion sovereign wealth fund. Called Laheq Island, it’s the firm’s first fully residential development as it works on a $27 billion property and tourism portfolio along the coast. 

Saudi Arabia started to open its property market to overseas buyers only recently and the hope is that developments like this will help draw much needed foreign investment. Red Sea Global’s projects are key to plans to turn the kingdom into a top holiday destination for tourists and some of the millions who come for the annual Hajj pilgrimage. Saudi officials are betting that the ultra-wealthy from around the world will also snap up properties as second or third homes.

Prices for apartments on Laheq Island start at 5.5 million riyals ($1.5 million) with villas starting at 18 million riyals and going as high as 150 million riyals, said Stephen Cheesebrough, head of development at the Red Sea Project at the company. 

The speed at which residential developments are being built marks a sharp contrast with delays in some of the so-called giga projects such as the sprawling futuristic city of Neom. Yet despite the big ambitions, attracting foreigners on a large scale is likely to be a challenge because the Saudi property market is nascent and social rules are still conservative with alcohol prohibited. 

The advances in the kingdom’s real estate sector pale compared to nearby Dubai where multi—million dollar properties are being snapped up at a brisk pace, driven by hundreds of buyers from around the world. 

“The ultra luxury property market is still in its infancy in Saudi because there isn’t much product,” said Faisal Durrani, head of Middle East research at Knight Frank. “There are buyers but they’re only a handful relative to the whole market and certainly relative to Dubai.” 

Saudi Arabia’s home prices have soared since 2019 with apartment values surging 96% and villas rising 53% since then, according to Knight Frank. However, transaction activity has dropped in the past 12 months amid a decline in affordability, according to the research firm. Crown Prince Mohammed bin Salman has said he will try to halt an ‘unacceptable’ rise in property prices amid concerns about living costs in cities like Riyadh.

Still, developments like the Red Sea project are targeted not at middle class families who need housing in major cities but the ultra rich locally and overseas who are shopping for holiday homes. 

Cheesebrough said demand for the Laheq project is solid, driven by buyers wanting multi-generational holiday properties as well as foreign investors and wealthy celebrities looking for privacy in a new destination. Among the international buyers is a UK Premier League footballer, he said, declining to name that person.

“We have spent the last two and a half years working on this project without much publicity,” Cheesebrough said about Laheq Island in an interview. “There’s a huge amount of work that was done before we even announced the project.”

The Red Sea has been popular with divers for decades because it hosts one of the world’s largest barrier reefs and an archipelago of islands with more than 2,000 species of fish. The location remains one of the world’s most pristine because Saudi Arabia has for decades limited the entry of tourists into the country. 

The 400-hectare Laheq island is designed to be a green community catering to the ultra-wealthy. The ring island was shaped by the dredging of a lagoon in the center.

The development will include 528 villas to the north and south of the ring as well as 221 apartments on the ring itself. It’s set to have a golf course, marina, a beach club, sailing and water-sports schools as well as a souk and two hotels. The Southern part is likely to open as early as 2028, Cheesebrough said.

Red Sea Global, which primarily focuses on hotels and resorts, has so far sold 1.5 billion riyals in residential properties, often as branded residences within its resorts, Cheesebrough said. The developer expects another 2 billion riyals in additional sales this year with the majority coming from Laheq Island, he said. 

So far, Red Sea Global has opened five hotels and another 11 resorts are expected to open this year. With room rates often reaching 7,000 riyals a night, its ultra luxury hotels are out of reach for many tourists. Cheesebrough said the opening of additional hotels will reduce the share of “hyper luxury hotels” and provide a broader mix, luring tourists with lower budgets. 

A new airport was recently opened in the area and airlines are increasing the frequency of international flights, he said. 

“As more hotels come online, we are going to see a huge influx of additional travelers to the destination,” Cheesebrough said.