Same boom, different books. (Illustration: CapitalSA)
Saudi property developers are selling more than they did a year ago. Whether that turns into profit depends mostly on land: who had plots to sell this year, and who sold theirs last year.
Revenue rose at five of the six listed developers that reported third-quarter results in the past two weeks. Profit went every way, from a 29% jump to a swing into loss.
Umm Al Qura, the developer behind Makkah’s Masar Destination, led the group. It sold three plots near the Grand Mosque for about 440 million Riyal ($118 million), twice their book value, and its profit rose 29% to nearly $179 million, the company said in a filing on Monday.
Net profit in the third quarter and change from a year earlier.
Where land helped: Riyadh-based Dar Al Arkan’s profit rose 13.5% to $77 million, as property sales climbed and financing costs fell. Revenue rose 10.7% to $300 million, the company said on Wednesday.
Where it hurt: Jabal Omar, which owns hotels and malls next to the Grand Mosque, swung to a $70 million loss from a $53 million profit, according to its results. A year earlier, it booked big one-off gains from selling land. Its revenue still rose 14% as its hotels and malls got busier.
Riyadh Development, which runs markets and commercial centers in the capital, saw profit fall 74% to $10 million. It sold land for about $26 million in the same quarter last year.
The builders’ squeeze: for companies that build and hand over homes, costs are the problem. Al Khobar-based homebuilder Retal’s profit fell 6.8% to $13.8 million despite record revenue of $204 million. Riyadh-based Sumou’s fell 12.7% to $11.4 million, even as revenue rose 11% to $44 million.
Construction costs are up 1.9% this year as regional tensions push material prices higher, Retal Chief Financial Officer Ammar Al-Ghoul told Al Arabiya Business.
What buyers are doing: still buying, but spending less. The number of mortgage contracts rose 21% in September from a year earlier while their total value stayed flat, Al-Ghoul said, citing central bank data.
More land is coming: Riyadh’s fees on idle land have pushed about 27 million square meters into development since January, enough for about 70,000 homes over the next two to three years.
Why it matters: the war has hit flights, events and travel, but housing demand is holding. The question now is margins. Land owners near the holy sites are cashing in, while homebuilders are giving up profit to keep volumes up.
What to watch: developers still to report, including Saudi Real Estate Co., and whether builders’ costs keep easing in the fourth quarter.
For more on why land near the Grand Mosque is selling for double, read Every Pilgrim Needs a Bed: Makkah Land Sells for Twice Its Value.
