The more than 300 apartments in Abdulsalam Almajed’s new Riyadh complex sold in just one month for cash, without him having to advertise.
This is Saudi Arabia, the world’s largest oil exporter. It’s no surprise that the housing market is red hot as revenues from a surge in energy prices flow through the economy.
But Almajed says the fight for the 1-million-riyal ($266,400) houses also reflects something else. The social and economic change is reshaping the kingdom, accelerated by the crown prince’s review program.
“There’s a change in mindset,” said Almajed, who runs family developer Almajdiah Residence. Some Saudis embrace the more open lifestyle their company serves. “Today there is a beautiful creativity in Saudi designs.”
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Ruler Mohammed bin Salman has centralized power and increased political repression. He was elevated by his father, King Salman, in 2015. He ended or relaxed restrictions on entertainment and how men and women can mingle and is trying to curb dependence on oil.
Ten years ago, many landlords did not even rent to women, who needed the approval of a male guardian for many life decisions. Today, women are entering the labor market in greater numbers. The 30% of Almajdiah’s buyers are women, acquiring investment properties or a house of their own.
They are helping to lift an economy transformed by energy markets. The world is concerned about spiraling inflation fueled by Russia’s war in Ukraine and potential recessions. Oil averaging more than $100 a barrel this year means Saudi Arabia’s economy is the fastest growing in the Group of 20.
Gross domestic product expanded 11.8% in the second quarter when the non-oil economy grew 5.4%. It is now higher than at the end of 2019 before the pandemic broke out.
Saudi Aramco is a state-owned energy company. The company reported the largest quarterly adjusted profit of any publicly traded company globally. Billions of dollars are flowing into Saudi coffers and increasing state investment. It is now boosting sentiment in the private sector that relies on government contracts.
Capital spending rose 64% annually from April to June. The kingdom embarked on a construction wave that includes shopping malls and parks. A grandiose plan for a new city built from scratch and a luxury tourism development on the Red Sea. Overall spending was 16% higher, even though this year’s initial budget forecast would fall.
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Summers usually send Saudi elites to colder climates in Europe, but Riyadh’s newer high-end restaurants are packed. At Coya, a Latin American chain, the most popular dining seats, from 8:30 to 9 p.m. — are fully booked one month in advance.
Combined cash withdrawals and point-of-sale transactions are indicators of consumer activity. These have rebounded, rising 9% year-on-year in June after an all-time high in March. Inflation last month was 2.7%, about a third of the rate in the United States or the Eurozone.
The Finance Ministry is trying to break the habit of wasting and cutting oil. He is flowing stimulus through sovereign wealth funds and into long-term projects. Long-term projects electric vehicle manufacturing and tourism.
The economy expects to expand by 7.6% this year. Growth could fall back to 2.5% by 2024, according to a Bloomberg survey of economists. Crude is now around $90 a barrel, as global fears about economic downturns. The potential for increased supply from Iran if its nuclear deal is resurrected continues to weigh on the market.
“If there were another collapse in oil prices, there would again be a slowdown in activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “But several positive factors are coming together right now.”
Almajdiah caters to wealthy professionals who want open-plan homes with abundant natural light. Many Saudis previously preferred houses with high walls and tiny windows to preserve privacy. But social openness, along with smaller families and tighter budgets, is changing that.
The developer’s newest complex is built around shared courtyards and features cafes, gyms, and a nursery.
The style echoes high-end housing in Dubai, the regional hub Prince Mohammed wants to compete with, announcing plans to double Riyadh’s population and attract millions of expats.
That is the key to Almajed’s optimism. The more people, the more apartments they will need, he said.
