New Saudi real estate visa a massive boost for investors; ultra-rich eye $2bn opportunity with high returns

Muslim global high net worth individuals (HNWI) are prepared to spend $1.96bn on real estate in the Holy Cities of Makkah and Madinah, said Knight Frank in its inaugural Destination Saudi report.

Knight Frank surveyed 506 Muslim global HNWI from nine countries to understand their attitudes, aspirations and appetite towards real estate investment in the Holy Cities of Makkah and Madinah.

Saudi real estate  

Together, the survey respondents own more than 2,250 homes around, with 29 per cent already owning between three and five properties.

Makkah (30 per cent) has emerged as the top wish list city by Muslim HNWI for real estate purchases in Saudi, while Riyadh (25 per cent) ranks second. 

Madinah (19 per cent) is the third most popular target location.

Knight Frank’s recent findings closely align with the government’s January unveiling of new Premium Residency options, including a property-ownership linked visa.

Faisal Durrani, Partner – Head of Research, MENA, said: “1.8m pilgrims performed Hajj during 2023. For many this is a life-long ambition, which is intrinsically attached to a desire to visit and/or live in Saudi Arabia.

“The fact that 84 per cent of global HNWI interested in purchasing in Saudi would like to do so in one of the Holy Cities underscores the depth of pent-up demand for home ownership from outside the country.

“And the demand appears to be genuine, with 48 per cent of those looking to purchase a property in Makkah intending to use it as a main residence”.

Harmen de Jong, Regional Partner – Head of Consulting, MENA said: “The new Premium Visa for property owners is a welcome move by the authorities.

“It is likely to bolster demand at a time when affordability and shifting residential market demand dynamics, largely driven by a greater desire among young intra-Saudi migrants to rent rather than own, has been slowing the level of deal activity.

“Indeed, nation-wide residential sales volumes were down 16 per cent last year”.

Knight Frank says the total number of year-on-year real estate transaction volumes across all asset classes in Saudi Arabia slipped by 17 per cent during 2023, while the total value of all deals declined by 9 per cent.

Muslim global HNWI budgets average $4.7m for the Holy Cities, according to Knight Frank.

40 per cent of those considering Makkah are prepared to spend upward of $5m.

Durrani explained: “The $4.7m average Muslim global HNWI budgets for homes in the Holy Cities will undoubtedly give further impetus to the Giga project developers, many of whom we expect will begin marketing homes from upwards of $1m, which sits above the bulk of domestic Saudi budgets – two-thirds of Saudi’s have a home purchase budget of up to SR1.5m”.

82 per cent of international HNWI buyers are keen to own real estate in Saudi Arabia.

Demand drivers underpinning the desire for home in the Kingdom stem largely from viewing Saudi as a “good investment opportunity” (60 per cent), with “cultural and religious reasons” ranking as the second most important consideration (45 per cent).

Speed also appears to be of the essence, with 22 per cent of HNWI keen to complete a purchase this year, with a further 33 per cent wanting to own property in the Kingdom in the next 12 to 24 months.

The majority of those wanting to purchase a property in Makkah prefer to pay the full amount (66 per cent) at the point of transaction, with only 33 per cent stating they would like to follow a payment plan.

Similarly, for those considering Madinah, 54 per cent are keen to pay for the property in full at the time of purchase, with the rest seeking a payment plan, according to Knight Frank’s analysis.

The desire to purchase the property entirely using cash rises exponentially with personal levels of wealth, rising from 31 per cent for those with a net worth of under $500,000 to 78 per cent for those worth more than $3m.

Mohamad Itani, Partner – Head of Residential Project Sales and Marketing, Saudi Arabia, said: “While the global wealthy clearly have a strong appetite to invest in the Kingdom, the challenge for developers will be to balance the expectations of the global wealthy with domestic buyers.

“For instance, 77 per cent of those wanting to buy a property in Makkah are interested in apartments, while the desire for apartment living in Madinah is even higher at 84 per cent.

“This is in sharp contrast to Saudi nationals, less than half of whom are interested in owning an apartment”.

Investors for the Holy cities also have high capital value growth expectations, with 37 per cent expecting annual price growth of six to 10 per cent in Madinah, while separately nearly a third (31 per cent) are expecting the same rate of increases in Makkah.

Prices in Makkah have risen by an average of 5.5 per cent over the last 3 years, compared to 5 per cent in Madinah over the same period.

This may prove to be a short-term challenge for developers as price growth across the country in this current cycle starts to peak.

The other significant factor, according to Knight Frank, is off-plan versus ready property, with just 30 per cent of global HNWI interested in the off-plan sales market in the Kingdom. 63 per cent favour something completed.