On an archipelago in the Red Sea off the coast of Saudi Arabia, opulent villas and apartments are springing up, providing the newest testament to the kingdom’s real estate boom.
Red Sea Global, a developer backed by Saudi Arabia’s $1 trillion sovereign wealth fund, is constructing the new residences, some of which are priced as high as $40 million, on a ring-shaped island. Known as Laheq Island, it is the company’s first entirely residential project as part of their $27 billion coastal real estate and tourist portfolio.
Only recently has Saudi Arabia begun to up its real estate market to foreign purchasers, and it is hoped that such changes would attract much-needed foreign investment. Plans to make the country a popular vacation spot for travelers and some of the millions who travel there each year for the Hajj pilgrimage depend heavily on Red Sea Global’s initiatives. Saudi authorities are placing bets that the world’s ultra-wealthy will also purchase properties as second or third residences.
According to Stephen Cheesebrough, head of development at the company’s Red Sea Project, flats on Laheq Island start at 5.5 million riyals ($1.5 million), while villas range from 18 million to 150 million riyals.
The pace of residential development construction stands in stark contrast to the delays experienced by some of the so-called mega projects, including the expansive futuristic city of Neom. However, because the Saudi real estate industry is still in its infancy and social norms are still conservative, including the prohibition of alcohol, it is likely to be difficult to draw in foreigners on a significant scale, despite the lofty goals.
Property boom
The kingdom’s real estate market has made little progress in comparison to neighboring Dubai, where hundreds of purchasers from all over the world are rapidly acquiring multi-million dollar houses.
“The ultra luxury property market is still in its infancy in Saudi because there isn’t much product,” said Faisal Durrani, head of Middle East research at Knight Frank. “There are buyers but they’re only a handful relative to the whole market and certainly relative to Dubai.”
According to Knight Frank, Saudi Arabian housing prices have skyrocketed since 2019, with villa values increasing 53% and apartment values increasing 96%. However, the research organization claims that a dip in affordability has caused a decline in transaction activity over the last 12 months. Amid worries about the expense of living in places like Riyadh, Crown Prince Mohammed bin Salman has stated that he will attempt to stop a “unacceptable” increase in real estate prices.
However, projects such as the Red Sea project are aimed at the ultra-rich both domestically and abroad who are looking for vacation houses, rather than middle-class families that require accommodation in large cities.
Solid demand
Demand for the Laheq project is strong, according to Cheesebrough, driven by customers seeking vacation homes that can accommodate multiple generations, as well as by international investors and affluent celebrities seeking seclusion in a new location. He stated that a UK Premier League football player is one of the foreign purchasers, but he would not identify the individual.
“We have spent the last two and a half years working on this project without much publicity,” Cheesebrough said about Laheq Island in an interview. “There’s a huge amount of work that was done before we even announced the project.”
Because it is home to one of the largest barrier reefs in the world and an archipelago of islands with over 2,000 different types of fish, the Red Sea has long been a favorite among divers. Due to Saudi Arabia’s decades-long restrictions on foreign visitors, the area continues to be among the most pristine in the world.
The 400-hectare island of Laheq is intended to serve as a green community for the very wealthy. A lagoon in the middle was dredged to create the ring island.
Along with 221 apartments on the ring itself, the building will also comprise 528 villas to the north and south of the ring. It will contain two hotels, a souk, a beach club, a marina, a golf course, and schools for sailing and water sports. According to Cheesebrough, the Southern portion is probably going to open as early as 2028.
Luxury Homes
According to Cheesebrough, Red Sea Global, which mostly specializes in hotels and resorts, has sold 1.5 billion riyals worth of residential real estate so far, frequently as branded homes inside its facilities. According to him, the developer anticipates an additional 2 billion riyals in sales this year, the most of which will come from Laheq Island.
Red Sea Global has already opened five hotels, and this year, an additional eleven resorts are anticipated to open. Many tourists cannot afford its ultra-luxurious hotels, which frequently have room costs of 7,000 riyals per night. According to Cheesebrough, the development of more hotels will draw in travelers on a tighter budget by lowering the proportion of “hyper luxury hotels” and offering a wider variety.
According to him, airlines are expanding the number of foreign flights, and a new airport was just opened in the region.
“As more hotels come online, we are going to see a huge influx of additional travelers to the destination,” Cheesebrough said.
