Oil revenues in the CSA are causing the wealthy to dramatically increase their investments in homes and real estate on the coast.

While the real estate market across much of the world is suffering from a downturn, with declining rental and sales values due to rising interest rates and gloomy economic forecasts, most Gulf Arab states have pulled back from the dominant trend based on a recovery in oil and gas prices after many European countries turned to golf as an alternative to compensate for the cutoff of Russian energy supplies following the war in Ukraine.

Despite the economic crisis and rising inflation and interest rates, affluent real estate buyers are likely to continue to seize opportunities over the next 12 months, according to the 2023 Wealth Forecast Report from Sotheby's International. With the oil and gas sector being a major driver in the Gulf economies, the recovery in energy prices by the end of 2022 and high forecasts for 2023 are helping to strengthen purchasing power in the region's luxury real estate market.

A recent report from Mead Magazine indicates that all six Gulf states are poised to benefit from rising energy prices following their fiscal surpluses in 2022, which is expected to be repeated in 2023. The report notes that while Arab Cooperation Council governments remain committed to fiscal discipline, construction projects and infrastructure developments are widely supported through a combination of vital infrastructure spending and development upgrades, and the business climate in the six countries remains extremely positive.

Real estate market in the UAE

To put this in context, the luxury real estate market in the UAE, especially in Dubai, has shown significant growth over the past year with 219 transactions totaling AED 14.3 billion ($3.9 billion), as reported by Bloomberg citing Knight Frank's partner and chief researcher for the Middle East, Faisal Durani. The number of luxury real estate deals, each valued at more than $10 million, totaled 219 in the emirate, surpassing the total number of deals completed between 2010 and 2020, according to Knight Frank. The report also indicates that "luxury neighborhoods in the emirates, such as Emirates Hills, Jumeirah Island and Palm Jumeirah, recorded price increases of 44% last year." As part of this, new urban areas in Dubai also had an increase in luxury property sales, including the Dubai Hills area owned by Emaar Properties, which had 15 deals worth more than $10 million in 2022, including a record AED 205 million deal. Majid Al Futtaim's residential real estate complex Tilal Al Ghaf also sold its front villas in the Crystal Lagoon area for AED45 million. The entire real estate market in Dubai is likely to grow by 5-7%, while the luxury real estate market is expected to double that level to around 13.5%, according to Durani.

Real estate market in Qatar

In Qatar, a report from Al Asmakh Real Estate showed an increase in demand for luxury real estate, especially in the Pearl and Lusail projects, and noted the completion of several buildings, most of which will be hotels, as well as residential and mixed-use projects, and other construction in the southern areas of Al Wakrah, Al Wukair and Al Mashaf, as well as parts of northern Doha. The Al Asmakh report notes that liquidity, both from government spending on the development of projects and from real estate developers and investors, together with increasing demand are the strongest drivers of growth and development of construction in various areas.

Real estate market in Saudi Arabia

In Saudi Arabia, data from the General Statistics Authority released last Thursday showed that real estate prices in Saudi Arabia increased by 1.6% in the fourth quarter of 2022 compared to the previous year, with the impact of a 2.6% increase in residential property prices, and among other residential properties, villa prices increased by 1.7% and apartment prices increased by 2.2%, while house prices decreased by 0.4% and residential building prices remained stable and almost unchanged. Overall over the past year, residential real estate prices in Saudi Arabia increased at a rate not seen in the past 8 years, with the annual average of the real estate price index at 1.1% compared to the annual average for 2021. Villa prices rose by 1.7% and apartment prices rose by 2.2%, while house prices fell by 0.4%, and the country's residential real estate market has seen significant recent activity to achieve Vision 2030, which aims to increase the percentage of Saudis owning a home to 70% by the end of the target period, and to turn the capital into one of the world's top 10 economic cities.

Real estate market in Oman

In Oman, the Duhm Economic Zone extends over an area of 2,000 square kilometers, it is a coastal strip of 70 kilometers in the Sultanate of Oman that allows for a variety of investment areas including real estate development. The development of the zone includes 8 projects, one of which is residential and includes luxury units, while the second phase, known as the "houses project", was launched last week by the government of the Sultanate of Oman. "Masakin" is the latest residential project in the zone and features a strategic location in the center of Duhm, 10 minutes from the city port and 15 minutes from the city airport. "Masakin" features a unique architectural design with scenic views and elegant glass facades that provide comfortable sunlight penetration and organization of spaces, which ensures a reduced likelihood of congestion and a comfortable living space. According to official figures, investment in the zone amounted to more than 3.6 billion Omani riyals ($9.35 billion) and the number of investment project leases totaled about 431 projects.