Saudi Arabia is set for a big rise in demand in short-term rentals, according to property management company Frank Porter.
The kingdom aims to be a top-five global tourism destination by 2030 as the country's leadership opens up the country to foreign tourism and investment.
With citizens now allowed to operate Airbnb-style property rentals after a new portal similar to the global lettings marketplace was announced last month, the sector is also expected to grow quickly.
“By funding key projects such as their imminent airline, RIA, as well as their coming futuristic city ‘Neom’, they are sure to attract a new wave of curious tourists looking for short term rentals in [Saudi Arabia],” Anna Skigin, chief executive of Frank Porter told The National.
“The accelerated demand for short-term rentals will drive industry growth as more investors will buy multiple properties to rent them out in the short-term market. This accelerated growth will benefit [Saudi Arabia], property investors and visiting tourists as they will have increased choice when it comes to accommodation.”
She said the expansion of short-term rentals will be similar to that of the UAE. Last year, Dubai was ranked as one of the most profitable cities for Airbnb landlords.
“Saudi Arabia can use the growth of the Dubai tourism and expat markets to encourage more visitors, highlighting the fact they are connected by a short, direct flight,” Ms Skigin said.
“Saudi is determined to be the next tourist destination, just as Dubai was, and is investing heavily into making this a reality.
“When it comes to countries with high expat numbers such as Dubai and KSA, the inherent transient nature, as well as the need for flexibility, has dramatically increased the demand for short-term rentals in 2023.
“The surge in travel post-Covid over the past year has seen the prices of hotel stays increase, which has further escalated demand for short-term rental properties.”
In the second quarter of 2022 — the last available data — the kingdom welcomed 3.6 million visitors, a 575 per cent increase over the previous year, according to figures released by the Ministry of Investment.
There was also an increase of 42.3 per cent in domestic tourism.
The National Tourism Strategy of Saudi Arabia aims to attract 100 million tourists by 2030.
The kingdom is developing a number of tourism projects, including Neom, a $500 billion futuristic city featuring a nature reserve, coral reefs and heritage sites on several islands along the Red Sea, and Qiddiya, a huge entertainment and sports project in Riyadh.
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How to turn your property into a holiday home
- Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
- Research equivalent Airbnb homes in your location to ensure competitiveness.
- Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
- Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
- Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.
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Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
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Your rights as an employee
The government has taken an increasingly tough line against companies that fail to pay employees on time. Three years ago, the Cabinet passed a decree allowing the government to halt the granting of work permits to companies with wage backlogs.
The new measures passed by the Cabinet in 2016 were an update to the Wage Protection System, which is in place to track whether a company pays its employees on time or not.
If wages are 10 days late, the new measures kick in and the company is alerted it is in breach of labour rules. If wages remain unpaid for a total of 16 days, the authorities can cancel work permits, effectively shutting off operations. Fines of up to Dh5,000 per unpaid employee follow after 60 days.
Despite those measures, late payments remain an issue, particularly in the construction sector. Smaller contractors, such as electrical, plumbing and fit-out businesses, often blame the bigger companies that hire them for wages being late.
The authorities have urged employees to report their companies at the labour ministry or Tawafuq service centres — there are 15 in Abu Dhabi.
