What's at Stake this week?

February 5, 2022

The weather may still be a bit *too* chilly for our liking here in Dubai after what seemed like a series of long rainy days. All you have to do now is get comfortable and get reading, we’ve got some interesting headlines to cover… Let’s jump in 👇

Market Zoom: Saudi Arabia

The perfect formula for growth 

According to the latest data from the General Authority for Statistics (GASTAT), real estate prices were up in Q4 by 1.6% YoY, a positive sign that was also reflected in property-specific categories. The report showed that the price of residential properties grew by 2.6% YoY, with apartments recording the highest price rise of 2.2% compared to villas which only saw a 1.7% increase. 

“Saudi Arabia has remained the largest construction market in the Middle East region, with a share of USD $31Bn out of a total of USD $87Bn worth of awarded projects during the first 10 months of 2022”, said the Head of Real Estate Advisory at KPMG. This should come as no surprise given the rapid transformations the property and infrastructure markets are undergoing based on the expectations laid out in the Vision 2030 plan. Currently, the share of construction is estimated at 6.4% of GDP which equates to an annual spend of SAR 197Bn, compared to their target of 8.8%. 

Further affirming the immense growth potential and real estate market opportunities, Bahrain-based private equity firm, Investcorp, announced earlier this year that it would invest as much as USD $1Bn in the Kingdom’s real estate sector over the next 5 years. With megaprojects like NEOM and the Red Sea Project in development and more on the horizon, it is the real estate landscape in Saudi Arabia is already gaining traction and witnessing great change which is feeding into other sectors like tourism and entertainment, which are witnessing significant investments of their own.

Just this month, Saudi Entertainment Ventures, a subsidiary of the country’s sovereign wealth fund, announced a new SAR 1Bn (USD $266M) entertainment destination in the city of Tabuk. Some of its many features include a 10-lane futuristic bowling experience, a 12-hole indoor adventure golf course, and a 10-screen cinema. 

The bottom line? Due to increased contribution to GDP, KPMG predicts the construction sector could reach SAR 382Bn by 2030, whilst demand for properties, especially on the residential side, increases in tandem with economic prosperity in the Kingdom. As Saudi Arabia continues to spearhead the adoption of innovative products and robust policies, we are bound to see major transformations materialize further in the coming period, especially as they render homeownership less of a distant dream for a new generation of Saudis. 

Market Zoom: Egypt

The CBE and the government see eye to eye

Although inflation is running high across Egypt, having risen to its highest rate in 5 years this past December, the overall economic outlook remains positive yet mixed in that regard. According to a new Reuters poll, the economy is expected to expand by 4.8% in the fiscal year 2022-2023, faster than initial government predictions which stood at 4%. Meanwhile, the World Bank, IMF, and Fitch Ratings predict the figure to measure up to 4.5% this year, tempered by persistent inflation, public investment slowdown, and belated tourism recovery.

To counteract this, Egypt’s Central Bank is reportedly taking proactive steps to monitor and regulate the financial sector, ensuring that it operates in a manner that is consistent with the country’s economic goals. Finance Minister, Mohamed Maait, expressed confidence in the Central Bank’s ability to do so and stated the government is working closely with the local entity to build and implement policies that facilitate establishing and sustaining economic stability. 

In its latest rating report, Standard & Poor’s expects Egypt’s economic growth rate to average 4% annually over the next 3 years, due to thriving construction and energy industries, as well as continued expansion in ICT, retail and wholesale trade, manufacturing, agriculture, and healthcare. Furthermore, the agency has decided to “keep Egypt’s credit rating in both local and foreign currencies unchanged at the “B” level”, as it expects FDI, complemented by financing from the IMF and GCC partners, to serve as solid foundations for support. To this point, following the approval of the USD $3Bn rescue loan, the Egyptian government has pledged to cut back spending on “flashy megaprojects” deemed once essential, according to the New York Times. Under the terms of the new financing, budgets must be allocated modestly and carefully to ensure continuity in the long run. 

The bottom line? Although the macroeconomic outlook for most North African countries is bleak post-Russia-Ukraine conflict, Maait has made it clear that Egypt aims to:

  • Attract FDI worth USD $10Bn 
  • Increase commodity export to reach USD $100Bn
  • Increase revenue coming from the tourism sector to USD $30Bn annually

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