Real estate valued high in the Saudi stock market
By Sharif M. Taha
The market capitalization of eight real estate companies listed on Saudi stock market (Tadawul) is estimated at SR 74 billion ($19.73 billion) with their capital reaching SR 37 billion($9.87 billion), financial analysts told Arab News.
Five companies are primarily working in leasing activities, including Saudi Real Estate Co., Tamir, Makkah Construction & Development Co., Taiba Holding Co. and Jabal Omar Development Company, whereas the remaining three companies are generating their revenues as a result of acquisition of lands and their development, and operation and selling or renting out to others, Sulaiman Al-Hawawi told Al-Jazeera Arabic daily.
Two of the last three companies have not yet begun their activities. They include Emaar and Knowledge Economic City, while the third, Dar Al-Arkan, is the sole firm following the principle of a real estate development firm, the analyst said.
However, the reality of the real estate firms listed on the Saudi stock exchange makes them fall short of undertaking the role of developer’s comprehensive work, which is to achieve an added value to the local economy through the expansion and construction of housing units for all categories of society, especially those destined for middle and low income bracket, the analyst said.
Al-Hawawi added that key challenges are awaiting the listed real estate development companies. These include reshaping their deployment and expansion of activity base that could match the overall real estate development in all cities of the Kingdom to achieve economic added value to their stockholders, and how to distance themselves from the traditional activity of real estate developer.
The major challenge for the listed real estate firms is represented in fees imposed on vacant lands, which are considered strategic stockpiles though they remained unexploited, he was quoted as saying.
Financial analyst Tariq Al-Madi stated that there is always a permanent link between the real estate and equity market. Elaborating on the issue, he said if any recovery came to the stock market, liquidity would move from the real estate to the stock market and vice-versa.
Any fall or collapse in the stock market will entail a whole or partial recovery in the real estate market, he said, adding that performance of the listed real estate firms has remained relatively stable in terms of profitability or annual cash dividend payouts.
According to Al-Madi, the decisions of the Ministry of Housing on land distribution and construction loans will have an impact on the stock market as the reduction of property prices will directly lead to the recovery of the stock market as more liquidity will be injected into the market as a result of increased sales operations in the real estate market.
The population increase in the Kingdom, the growing demand on housing units coupled with the unique demographic structure (60 percent of population is less than 25 years of age) will, undoubtedly, give a boost to the real estate market and make it an attractive investment avenue, he said.
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