Saudi Arabia will weather a tough real estate market in 2009 thanks to demand for residential property, outperforming a downward trend in the rest of the Gulf, Moody's Investors Service said on Wednesday. Residential and commercial real estate markets in the Gulf are under pressure due to tight liquidity, lower demand and a worsening consumer confidence, the rating agency said in a report on market conditions for the next 12-18 months. “Saudi Arabia is the notable exception as it benefits from a large and growing indigenous population base and structural under-capacity for residential property, especially for low- and middle-income families,” Martin Kohlhase, assistant vice president and analyst at Moody's, said in the report. The once-booming real estate markets of Dubai and Doha will be affected most with a decline in property prices and a slowdown in construction activity, said the agency. Layoffs by many companies in the wealthy Gulf region, hit hard by a global economic crisis, will also affect demand for residential properties and create over-supply in the rest of the Gulf, said Moody's. Dubai's real estate sector is facing a sharp price correction and hundreds of billions of dollars of construction projects have been cancelled in the United Arab Emirates as a result of the economic slowdown. Despite that, Moody's said it expects strong government support to continue which will benefit most real estate firms in the region. “Public infrastructure spending remains buoyant on the back of economic stimulus packages, which have been bolstered by government surpluses accumulated during the period of high oil prices,” the report said. The cost of a land plot in cities such as Jeddah over the past two years has rocketed by about 100 percent with the rise attributed to high demand against weak supply, in addition to a significant turnover in the sale and purchase of plots. Residential land in Jeddah districts such as Al-Nuzlah, Al-Marwah, and Al-Na'eem range between SR650,000 ($173,000) and SR800,000. “One of the main reasons for the price rise in main cities is the purchase by real estate investors of whole districts or large parts of them, enabling them to control prices or leave the plots as they are for several years without selling them,” real estate specialist Saad Al-Qarni t said. “We need to prevent single ownership exceeding five percent of a planned district, following the system used in the Saudi stock market. High single ownership percentage means a control on prices to keep them high.”
