LONDON: Self-made Saudi Arabian billionaire Sheikh Ghassan Al Nemer is on a mission to entice foreign investors back to his burgeoning domestic real estate market, which he says is just as safe as buying gold.
The Dammam-born owner of conglomerate Ghassan Holding Group, who made his early fortune in gold trading, believes investors chasing costly London assets could buy better in Saudi, the frontier Gulf market in which many investors fear to tread.
Such is his confidence in the prospects of the kingdom’s real estate market, the property-to-precious metals mogul has boldly offered to underwrite any foreign property investment that fails to deliver double-digit growth in the next two years.
"If an investor is working for profits, the Saudi market is certainly a better option than London," Al Nemer told Reuters.
"I advise UK buyers to seriously consider investment in Saudi. They will see big profit and a big future in it. And I will happily be their guarantor," he said.
The concept of safe-haven investment and Saudi real estate appear unlikely bedfellows after years of fruitless talks to set up a transparent mortgage market and improve landlord rights.
Al Nemer admits he has no idea when the long-awaited Saudi Mortgage Law will be passed but if economic forecasts prove true, the 47-year old father-of-five will not be out of pocket.
Latest analysis from Moody’s Investors Service described Saudi Arabia as "one of the brighter spots" of the GCC property market, while research from NCB Capital, the kingdom’s largest investment bank, suggests Saudi Arabia is grappling with "considerable excess demand" in many market segments.
Despite its vast petro-chemical wealth, this unstated demand for homes, hospitals, schools, malls, offices and infrastructure has left the pace of urbanization and the day-to-day quality of life for the average Saudi citizen trailing behind less wealthy territories like Bahrain, Dubai and Oman.
The demand-supply imbalance is likely to worsen if GDP expands in line with forecasts for 4 to 4.4 percent growth per year between 2010 and 2012, NCB Capital research shows.
Foreign real estate investment is vital to help domestic property players address this massive shortfall, Al Nemer said, predicting price growth in excess of 30 percent.
"This is a virgin market and there’s a lot of development that needs to be done. That is why I have 90 percent of my business in Saudi and only 10 percent outside," he said.
Ghassan Holding hopes to grow its land and property portfolio by 50 percent to 4.5 billion Riyals ($1.2 billion) this year. It also plans to invest up to 250 million pounds ($360 million) in central London development.
While Abu Dhabi and Dubai property companies are already beating a path to the kingdom, most Western investors in the region are still reeling from Dubai’s shock collapse.
Freefalling property values in the emirate have choked overseas property investor interest in the Middle East, particularly Saudi Arabia, seen by many as the region’s most economically sound market but also the hardest to break into.
This partly explains why prices are almost 60 percent below the Middle Eastern average, NCB Capital estimates show.
Saudi authorities are making strides to correct this reputation, Al Nemer said, earmarking 7 billion Saudi Riyals to help pay for lawmaking and improvements to the court system to clarify and uphold foreign ownership rights.
"It’s very important to note how the system of government in Saudi is changing. Even though it is a kingdom, the important decisions on reform now all go through the Saudi parliamentary system to be approved," he said.
"I have not seen any foreign investor have their rights taken away. Don’t think that I am saying this to you just because I am a Saudi. This is what I see," Al Nemer added.
Indeed, as the keen camel rider and racehorse owner points out, the kingdom is mulling reforms to join the few territories in the Middle East in which foreigners are allowed to purchase property independently without a local sponsor.
The unwelcome associations between Saudi and debt-drenched Dubai have stirred Al Nemer, who says Saudi’s existing wealth means its rulers have no need to pursue short-term speculative gains of the sort which brought the emirate to its knees.
"You cannot compare the Saudi market to Dubai. The ruler of Dubai is a businessman, that it is his mentality. But the mentality of the King is legacy. He is thinking of the future of the country, not just short-term profit."