Saudi Arabia’s boom is not just about oil this time either

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The more than 300 apartments in the new Almajdiah Residence complex in Riyadh were sold in just one month for cash, without the company even needing to advertise.

This is Saudi Arabia, the world’s largest oil exporter, so it’s no surprise that the real estate market is red hot as the proceeds of soaring energy prices flow into the economy.

But Almajdiah chief executive Abdulsalam Almajed says the scramble for the 1 million riyal ($266,400) homes also reflects something else: social and economic change reshaping the kingdom, accelerated by the crown prince’s overhaul program .

“There is a change in mindset,” said Almajed, who heads a family-owned developer, as some Saudis embrace the more open lifestyle his company serves. “Today there is beautiful creativity in Saudi Arabian designs.”

While de facto ruler Mohammed bin Salman has centralized power and increased political repression since he was elevated by his father, King Salman, in 2015, he has ended or relaxed restrictions on entertainment and how men and women can mix , and is trying to reduce dependence on oil.

Ten years ago, many landlords wouldn’t even rent to women, who needed a male guardian’s approval for many life decisions. Today, women are entering the workforce in greater numbers and 30% of Almajdiah buyers are women, acquiring investment properties or a home of their own.

They are helping to lift an economy that has been transformed by energy markets. With much of the world worried about spiraling inflation fueled by Russia’s war in Ukraine and potential recessions, oil averaging more than $100 a barrel this year means Saudi Arabia’s economy is the fastest growing in the Group of 20.

Gross domestic product rose 11.8 percent in the second quarter, when the non-oil economy grew 5.4 percent, and is now bigger than at the end of 2019, before the pandemic hit.

State energy company Saudi Aramco reported the biggest quarterly adjusted profit of any listed company worldwide. Billions of dollars are pouring into Saudi coffers and boosting state investment, boosting sentiment in a private sector dependent on government contracts.

Capital spending rose an annual 64% in April to June as the kingdom embarks on a building spree that includes shopping malls and parks, as well as grandiose plans for a new city built from scratch and a luxury Red Sea tourism development. Total spending was 16% higher, even though the original forecast for this year’s budget would be reduced.

Summers usually send Saudi Arabia’s elite to cooler climes in Europe, but Riyadh’s newest high-end restaurants are packed. At Coya, a Latin American chain, the most popular dinner seats — from 8:30 to 9 p.m. — are fully booked a month in advance.

Combined cash withdrawals and point-of-sale transactions, a measure of consumer activity, have rebounded, rising 9% year-on-year in June after hitting a record high in March. Inflation last month was 2.7%, about a third of the rate in the US or the eurozone.

The Treasury is trying to break the habit of oil-tracking outflows and cuts, the flow of incentives through government funds and into long-term projects such as electric vehicle manufacturing and tourism.

The economy is expected to grow 7.6 percent this year, but growth could fall to 2.5 percent by 2024, according to a Bloomberg survey of economists. Crude is now around $90 a barrel as global fears of a recession and the possibility of more supply from Iran if its nuclear deal is resurrected continue to hang over the market.

“If there is another collapse in oil prices, there will be another slowdown in activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “But several positive factors are coming together at this point.”

Almajdiah is aimed at affluent professionals who want open-plan homes with plenty of natural light. Many Saudis in the past preferred houses with high walls and tiny windows to maintain privacy. But societal openness, along with smaller families and tighter budgets, is changing that.

The developer’s newest complex is built around communal courtyards and features cafes, gyms and a childcare centre.

The style echoes high-end residences in Dubai, the regional hub that Prince Mohammed wants to compete with, announcing plans to double Riyadh’s population and attract millions of expatriates.

That’s key to Almajed’s optimism, which has helped push the real estate developer he runs to begin planning an initial public offering. The more people, the more apartments will be needed, he said.

(Adds company’s IPO plan to last paragraph)

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