The Saudi property market offers some of the strongest fundamentals in Gulf and international investors must take a close look at the sector, says a new report from HSBC.

Saudi Arabia is unique in the Gulf in that it has a large and under-provided domestic market, and the bank estimates that the country will need one million new homes by 2014.

Real estate companies in Saudi Arabia are set to benefit from macro-economic trends and socio-economic factors, it said.

In a comprehensive report on the sector, HSBC’s team concluded that Saudi Real Estate merits investment because:

• The shortfall of new homes required is unlikely to be met, meaning prices and rents will continue to rise
• The kingdom’s young population is set to expand
• The average number of people living in each dwelling is expected to continue to fall
• Homes remain relatively affordable in the kingdom, compared to other gulf countries
 
However, the report does not ignore risks: The slowing global economy will have an impact on Saudi Arabia, and the bank predicts property prices and rents to decline by 15 per cent in 2009 in certain areas.

But HSBC’s analysts see the country’s fundamentals as being stronger than the risks.

International institutions have been able to invest indirectly in Tadawul-quoted stocks since summer of 2008.

“These are interesting times for investors looking at Saudi Arabia,” said Raj Sinha, head of  equity research, HSBC Saudi Arabia. “The kingdom looks set to emerge from the credit crisis in a better shape than many other emerging markets, and we remain positive towards the prospects for the Kingdom’s listed companies.”
 
HSBC was the first international bank to establish an investment banking operation in the Kingdom, and is now the largest and most widely represented international bank in Saudi. -TradeArabia News Service