Alpha1Estates: Makkah-Madinah Real Estate Index falls 18% in 2018 as structural issues impact

February 7, 2019: Global real estate advisory firm Alpha1Estates International said on Thursday that its real estate index for Makkah and Madinah had fallen by 18% in 2018, reflecting a slowdown in the Kingdom’s real estate sector, driven by commercial, economic and wider structural issues.

Though the Ihsan al-Haramain Index, the influential index used to solely track Saudi-listed companies involved in real estate development in Makkah and Madinah, outperformed real estate stocks in the Kingdom which fell dramatically by 31% in 2018, it was significantly behind an 8% percent annual rise in the Saudi market’s major Tadawul All Share Index (TASI).

‘Investors in real estate in the Kingdom, and in the Holy Cities, in 2018 expressed concerns about listed real estate companies, such as their high levels of indebtedness, rising financial costs, but were also affected by external factors such as a low oil price, geopolitical risks, and the general economic outlook,’ said Mr. Talal Mahmood Malik al-Alawi, Chairman and CEO of Alpha1Estates International. “More so, they are also wider structural issues affecting the sector, such as the need for new legislation which can help the market to mature and which the likes of key government stakeholders like Public Investment Fund (PIF) can help to facilitate with their mega-projects in the Holy Cities.’

There was a near universal fall across all stocks on the Ihsan al-Haramain Index by year end, with Dar Alarkan Real Estate Development Company and Jabal Omar Development Company both dropping around 40% in value, and Knowledge Economic City in Madinah by around 30%. Eight out of 10 stocks in the Real Estate Management Development index fell by double-figures, with only one, Makkah Construction & Development Company, showing a slight gain of 4%.

On 23 April, in the seminal article, ‘An Arabian Future’, published in the Saudi Gazette to mark the second-year anniversary of the launch of Vision 2030, Mr. Malik outlined his views on the future of the real estate sector in the Kingdom, as endorsed by the Royal Court:

‘Home ownership is an aspiration in the Kingdom, be it for Saudis as citizens, for Muslims in the Holy Cities or across the Red Sea for everyone, a thriving economy can be facilitated with induced maturity of the real estate sector.’

In order to ensure stability, non-oil economic dependence and global marketing in the real estate sector of Makkah and Madinah, Alpha1Estates in 2012 proposed five critical pieces of legislation that focus on globalising the sector, which can lead to greater investments, prosperity and quality of life in the Holy Cities. These included easing of immigration and travel for non-Saudi Muslims; setting up a real estate regulatory authority to monitor buying and selling of real estate and prevent monopolies; empowering non-Saudi Muslim ownership, leasing and investment of real estate; easing non-Saudi Muslims setting up a company, working, residing or studying in the Kingdom, and introducing and scaling Islamic mortgage financing in the Kingdom.

On February 26, Mr. Malik was honoured to be a special guest at the first Riyadh International Humanitarian Forum (RHIF), inaugurated in person by the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al Saud. Sister companies of Alpha1Estates provided strategic services at the first RHIF organised by the King Salman Centre for Humanitarian and Relief Works.

Mr. Malik also met with HRH Crown Prince Mohammad bin Salman bin Abdulaziz Al-Saud in Saudi Arabia on 24 October 2017, a milestone event which went viral on social media, was interviewed by the United Kingdom’s Guardian Newspaper on the accession of the Crown Prince on 21 June 2017. ¬¬

Crown Prince Muhammad bin Salman personally launched the Saudi Vision 2030 in April 2016, an economic diversification plan to reduce the Kingdom’s dependence on oil, and in June, the National Transformation Program (NTP) was launched with 543 policy initiatives across 24 government entities.

In Vision 2030, the Kingdom regards as its first pillar its status as the heart of the Arab and Islamic worlds. In NTP 2020, the Kingdom has aims to increase the number of Hajj and Umrah pilgrims to 30 million by 2030 and to increase the sectoral revenue through private sector partnerships by a tremendous 240-times fold from SAR 80 million (USD $ 21.3 million) and SAR 19 billion (USD $5.1 billion).

The Crown Prince as part of the Vision 2030 has announced the proposal for foreign residents in Saudi Arabia to potentially obtain green cards for permanent residence, which would contribute over USD $10 billion to government revenues, with these currently under study by the Shoura Council. As part of Vision 2030, the Kingdom said it ‘would will seek to improve living and working conditions for non-Saudis, by extending their ability to own real estate in certain areas, improving the quality of life, permitting the establishment of more private schools and adopting an effective and simple system for issuing visas and residence permits.’

Alpha1Estates International launched in 2006 to become the world’s first company to market Saudi Arabian property globally and also the first company to market property in both Makkah and Madinah, and has worked with the three of the five largest real estate developers in Saudi Arabia and five of the biggest in the Middle East.

Alpha1Estates International is a global real estate advisory firm headquartered in the United Kingdom, with offices in Dubai UAE, and Jeddah, Saudi Arabia. It primarily focuses on emerging real estate markets. The company has advised on some of the Middle East’s most prestigious real estate projects, working with the largest developers.

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