This report does not constitute a rating action.
We expect the Saudi real estate market will continue to grow, helped by ambitious government plans and evolving consumer preferences. Affordability issues and execution risks will need careful navigation, though, in light of macroeconomic pressures and relatively high interest rates.
What's Happening
Residential prices across Saudi Arabia have risen significantly thanks to financing support from the government and growing demand. The value of new mortgages issued by banks increased 17% to Saudi riyal (SAR) 91 billion ($24.3 billion) in 2024 fueled by the Saudi central bank cutting interest rates by 100 basis points (bps) in line with the Fed. Initiatives such as the government-backed Saudi Mortgage Guarantees Services Company (Dhamanat), which provides mortgage guarantees among other services, are also driving the surge in home financings for low-income Saudi citizens. The pick-up in off-plan residential projects will see a higher share of off-plan mortgages.
Why It Matters
The government remains the key driver of residential real estate growth, with its home ownership targets (70% home ownership by 2030, 65.4% achieved in 2024) and funding support to nationals. Global trade tensions are heightening risks including slower economic growth, higher inflation, and most importantly increased pressure on oil prices. But Saudi Arabia’s population growth, its Vision-2030-related activity, and supply shortages in large urban centers will likely keep fueling the market.
Rising residential prices and rents in the major cities are raising the question of affordability. Traditionally, Saudi nationals have relied on family funds and personal financing from banks. However, over the past few years, mortgages from Saudi banks have become the main source of real estate financing, growing to about $180 billion, or 23% of all loans, as of the end of 2024. We expect interest rate cuts will boost mortgage growth after a moderate slowdown in 2022-2023. We also note that off-plan mortgages are becoming the norm, which could expose banks to developers’ execution risk. The premium residency visa program for non-Saudis is yet to meaningfully contribute to residential growth, probably because of the sizable minimum investment requirement of SAR4 million (under one of the visa options).
The government has collaborated with developers to launch projects across Saudi Arabia. The total residential supply across Saudi Arabia’s five major cities (Riyadh, Jeddah, Dammam, Mecca, and Madinah) was 3.5 million units in 2024. Based on Knight Frank’s analysis, this figure is projected to reach nearly 3.9 million units by the end of 2028, reflecting the government’s ongoing efforts to enhance housing availability. We also understand that the government will make certain land allocations annually for affordable housing to make it more accessible and control prices.
What Comes Next
We expect a strong pick-up in residential transaction volumes and values in 2025 in Saudi Arabia. Residential transactions grew by 38% to surpass 200,000 and the value of residential transactions increased by 35% to SAR164.8 billion in 2024, according to Knight Frank. We expect this momentum to build given the government’s initiatives to increase home ownership, and still-strong demand in major hubs like Riyadh and Jeddah due to growth in economic activity, and Mecca and Madinah due to increased religious tourism. The newly launched premium residency visa program for non-Saudis to invest could also gradually pick up in 2025.
Higher costs of home ownership will quickly change consumer preferences but offers an opportunity for sector transformation. Living in apartments instead of villas and townhouses is becoming more socially acceptable. Buyer preferences are skewing toward off-plan with mortgages rather than ready-to-move-in homes. The real estate regulation reforms of 2024 include several improvements like escrow accounting, standardization of agreements, and enhanced governance and transparency to strengthen investor confidence. In addition, there will be fees on idle land that could spur development activity. In our view, these rapid changes are offering developers and investors a supportive environment in which to change the landscape of Saudi Arabia’s residential market.
Related Research
- Saudi Banks Can Manage Their External Debt Spike, April 30, 2025
- GCC Companies Brace For A Storm, April 29, 2025
- Saudi Residential Real Estate: The Market Is Booming, Nov. 11, 2024
| Primary Contact: | Sapna Jagtiani, Dubai 971-0-50-100-8825; sapna.jagtiani@spglobal.com |
| Additional Contacts: | Mohamed Damak, Dubai 97143727153; mohamed.damak@spglobal.com |
| Tatjana Lescova, Dubai 97143727151; tatjana.lescova@spglobal.com | |
| Bedanta Roymedhi, Dubai 971-0-50-747-5221; bedanta.roymedhi@spglobal.com |
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