NEOM has been named as the most preferred Giga project to buy a home among Saudi buyers and GCC-based high-net-worth-individuals (HNWI), according to the to global property consultant Knight Frank’s flagship 2023 Saudi Report.
In its survey of 1,014 Saudi-national households, and a further 107 GCC-based HNWI, carried out in partnership with YouGov, Knight Frank has found that NEOM, for a second year running, is the most preferred Giga project among Saudi homebuyers, while GCC-based buyers are also eyeing up the new Saudi supercity.
Faisal Durrani, Partner – Head of Middle East Research explained: “For the second consecutive year running, NEOM is being viewed by Saudis as the Kingdom’s ‘crown jewel’.”
The rest of the Giga projects ‘popularity’ league table has seen a significant shake-up. Last year, The Red Sea Project and Diriyah Gate were positioned in second and third place, respectively. For 2023, Jeddah Central (19%) and King Salman Park (10%) are now the new favourite home purchase targets, behind NEOM, says Knight Frank.
Durrani continued, “The Red Sea Project has slipped to fifth place and this is most likely due to the fact that it is among one of the most advanced Giga projects, in terms of its development – it is increasingly clear that it is a luxury holiday destination, with an emerging high-end second homes market. Similarly, Diriyah Gate, which fell to sixth place overall, too is being positioned as a high-end residential destination.
“With average home prices rising exponentially over the last two years – 54% for apartments and 32% for villas in Riyadh – households are being forced into a holding pattern while they save increasingly larger deposits and at the same time contending with rising interest rates, it is perhaps unsurprising to see demand pivoting to those projects that are perceived to be more affordable as well as those which have been recently announced, or have shared development updates in recent months.
“Positively for Giga project developers, however, the proportion of those keen on acquiring a home in any of the new Saudi cities of the future remains virtually unchanged on last year at 86%, with up to two-thirds willing to spend up to SAR 1.5 million. And Al-Ula has the distinction of attracting the biggest spenders, with the historical city attracting largest proportion of would-be purchasers willing to spend upwards of SAR 5.5 million”.
GCC WEALTH
Knight Frank’s research has similarly found that NEOM is high on the agenda for the region’s wealthy. 29% of GCC-based HNWI are eyeing up the city of tomorrow for an investment.
Durrani said, “The appeal of real estate in the Kingdom is high, likely driven in large part by stellar economic growth for the region’s elite, Giga projects are not yet as attractive as existing cities, such as Riyadh, which 29% are actively targeting. The somewhat lower interest in Giga project developments could stem from a combination of lack of information and/or a lack of tangible development. What is interesting however is that the Red Sea Project is the second most attractive Giga project as it is quickly becoming synonymous with luxury and high-end second homes.
“And when it comes to budgets, just 6% are willing to spend more than SAR 4.5 million, with the bulk (66%) looking to spend up to SAR 1.5 million.”
When presented with the option to have local financing offered by Saudi parties, the appetite amongst GCC-based HNWI was exceptionally high at 95%. Financing by a developer (57%) is the top preference (57%), followed by financing by local banks, or institutions (38%).
“The lack of local financing options for international buyers and investors is often seen as a barrier to the development of a flourishing investment market in any part of the world and the same is likely true in the Kingdom, at least for the time being. The fact that so many GCC-based HNWI are keen on local debt financing options strongly hints at powerful lever that has the potential to radically alter the residential market’s demand dynamics” concluded Durrani.