NEOM USHERS IN SPATE OF PROPERTY DEVELOPMENTS IN SAUDI

A new residential development – coupled with a state-of-the-art lifestyle and a tourist destination for citizens and visitors – is emerging in Saudi Arabia, which is expected to generate strong flow of foreign direct investment.

In October, the government announced that it will begin first phase of development of the USD 500 billion NEOM smart city project, after preparation works to develop the infrastructure of the first residential area accelerated.

“Work on the first airport in NEOM is expected to be completed before the end of 2018 with bi-weekly flights operating to and from NEOM scheduled at the start of 2019,” according to the Saudi Press Agency. “This comes as part of a general plan to establish a network of airports in NEOM that will include an international airport with world-class standards.”

Launched in 2017, the smart city development is spearheaded by the Public Investment Fund, the kingdom’s sovereign wealth fund, and will also feature a variety of local and international investors.

Located in the strategically important north-west region of the country, straddling the Middle East and Africa, and at the crossroads of Asia and Europe, the city will be spread over an area of 26,500 square kilometres – slightly smaller than Belgium.

Its location on the Gulf of Aqaba will ensure that residents enjoy an uninterrupted coastline stretching over 468 kilometres, with a dramatic mountain backdrop rising to 2,500 metres to the east.

The site will also become the gateway to the King Salman Bridge, connecting Asia and Africa, further elevating the economic zone’s significance.

"NEOM’s land mass will extend across the Egyptian and Jordanian borders, rendering NEOM the first private zone to span three countries," according to the company.

The government has identified 16 economic sectors to create a sustainable economy, which are expected to generate an annual income of USD 100 billion.

“We are aware of the challenges we face in developing a mega project such as NEOM as it will be the largest international special zone in the world in terms of size and scale of investments,” said Nadhmi Al-Nasr, chief executive officer of NEOM.

“However, our capabilities, backed with strong political, financial and logistical support, will enable us to achieve what we plan for, especially that we are dealing with a greenfield project in an untouched land.”

While the government is keen to build a brand new residential city with the latest amenities, it is also proceeding with a number of projects in main metropolises to address Saudi’s housing shortage.

In October, the Ministry of Housing‘s Eskan Programme signed two agreements and a memorandum of understanding (MoU) to boost investment in the country’s housing sector. The investment included a co-operation deal between US-based Katerra and the Eskan Programme to build 50,000 housing units annually and six to eight plants specialised in modern construction technologies, which will create 15,000 jobs.

A separate MoU focuses on a residential real estate development in the Al Asfar project valued at USD 2.7 billion with PowerChina International Group and National Housing Company to build 17,000 housing units over the next six years. The development will create 4,000 jobs in the sector.

Another USD 1.2 billion agreement was sealed with Alameriah and Sany (a Saudi-Chinese Partnership) for the construction of three housing projects featuring 9,500 units in Dammam and Jeddah.

In addition, the Ministry of Housing is developing the first phase of ‘East Gate’ project, in conjunction with Hamad and Ahmed Mohammed Al-Mozaini Real Estate Company.

Phase 1 is expected to be completed in 36 months and will feature 2,129 affordable villas at a cost of SAR 1.4 billion.

East Gate is considered one of the largest fully integrated affordable housing projects in the kingdom, extending across 6.5 million square metres of land and providing almost 6,000 residential villas in total.

The government is also looking at new technologies to boost housing requirements. The National Housing and Industrial Development and Logistics Programme recently announced that it had succeeded in the first home building experience using 3D printing technology, considered a breakthrough fourth-generation building technology.

While new real estate projects are springing up, the sector is still in a stage of flux. The country’s Real Estate Price Index, which measures the performance of the real estate market, remains muted, in a sign that prices remain at the lower end.

The Real Estate Price Index moderated 2.1% for the residential sector in the third quarter compared to the same period last year. Villa prices eased 1.4%, while apartments fell 2% during the period, according to the General Authority for Statistics.

Compared to the third quarter of last year, prices have fallen 3.8% in the third quarter of 2018