GCC real estate sector to witness acceleration in H1 2023, report says

RIYADH: The real estate sector in the Gulf Cooperation Council countries is expected to grow in the first half of 2023,  driven by strong macroeconomic fundamentals, according to a report published by the Kuwait Financial Center, also known as Markaz. 

The center noted that Saudi Arabia’s ‘Real Estate Macro Index’ score for the first half is 3.5 out of 5, while Kuwait and the UAE scored 3.6 and 3.7 respectively – indicating that the sectors are expected to be on a solid upward trajectory in the first six months of 2023. 

According to Markaz, a score of 5 indicates ‘strong’ growth, while a score of 1 indicates poor performance. 

The ‘Real Estate H1 2023 Outlook’ further noted that Saudi Arabia’s non-oil economic growth is expected to accelerate in the first half of this year, while the overall economic growth could slow down in 2023 compared to 2022. 

Markaz added that the value of real estate transactions in Saudi Arabia from January to September 2022 had been SR 172.5 billion ($45.98), marking an increase of 12.2 percent year-on-year. 

“Saudi Arabian real estate market has been broadly positive, supported by favorable economic conditions and government initiatives. However, rising interest (rates) and sober global economic outlook poses some headwinds,” said Markaz in the report. 

According to the Markaz report, the UAE economy is anticipated to witness robust growth in 2023 and record a gross domestic product increase of 4.2 percent – echoing the forecast made by the International Monetary Fund.

The report further pointed out that the real estate sector in the UAE had a positive 2022, witnessing a rise in rentals and property prices. 

“From the start of the year, 2022, to September 2022, average property prices and rents increased by 8.9 percent and 26.6 percent respectively in Dubai. Transaction value in the first nine months of 2022 in Dubai touched record-high levels and has already surpassed the volume witnessed in full-year 2021,” said Markaz in the report.

Kuwait’s real oil GDP growth rate is expected to be 2 percent in 2023, lower than the 12.4 percent seen in 2022, owing to production cuts mandated by the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, according to the report. 

The report further noted that the non-oil economic activity in Kuwait is expected to grow at 3.4 percent in 2023. 

The Markaz report added that sales in the real estate sector were stable in the third quarter of 2022 supported by commercial and investment sectors compensating for the decline in the private housing segment. 

Commercial sector growth in Kuwait witnessed a year-on-year rise of 241.6 percent to 124 million Kuwaiti dinars ($404.09 million), while investment in the sector was at 253 million dinars during the third quarter of 2022. 

The report is prepared by Marmore MENA Intelligence, the research arm of Markaz, and it is designed to help investors in identifying the current state of the real estate market using a list of economic indicators.