Something’s up with the Saudi property market. On the surface, it looks amazing with real estate transactions hitting a record 2.5 trillion riyals in 2024, equivalent to 533 billion dollars. To add more optimism, over 622,000 deals changed hands across approximately 5.8 billion square metres, according to the Ministry of Justice.
Those are mind-boggling numbers for a market that was slumbering not too long ago. However, there is an elephant in the room that no one dares to address. Is all this sustainable or a speculation bubble waiting to implode?
The math starts looking questionable when you dig into the details. Commercial real estate prices jumped 11.7% year-on-year in the second quarter of 2025, driven primarily by a 12.7% spike in commercial land prices. Residential rental rates in Riyadh surged 10% year-on-year in the third quarter of 2024.
Grade A office rents in the capital reached 2,700 riyals per square metre by early 2025, marking a 23% increase compared to the previous year. These are not modest adjustments. These are the kind of rapid price increases that historically precede market corrections.
The fuel behind this fire is obvious: Vision 2030’s giga-projects. NEOM alone was initially valued at 500 billion dollars, though recent estimates have ballooned to somewhere between 1.5 and 8.8 trillion dollars depending on which report you believe.
The Red Sea Project, Qiddiya, Diriyah, and dozens of other mega-developments are pumping unprecedented amounts of money into construction. According to Knight Frank, Saudi Arabia held 1.5 trillion dollars in unawarded construction projects as of early 2024. That represents the world’s largest construction pipeline.
The Speculation Playbook
This is the real situation on the ground. Mega-projects supported by the government are introduced with eye-catching graphics and lofty deadlines. As speculators wager on future demand, nearby land values quickly rise. Plots close to these projects are quickly purchased by developers, frequently at exorbitant prices.
Financial institutions offer generous funding in an effort to capitalise on the euphoria surrounding Vision 2030. According to Standard & Poor’s, real estate will contribute almost 10% of GDP by 2030, up from 5.9% in 2023. Everyone is wagering on sustained expansion.
However, there are already warning indicators. According to MEED data, the amount spent on giga-projects decreased from USD 34.6 billion in 2023 to USD 24.2 billion in 2024. Just 6.5 billion dollars had been invested through the first eight months of 2025; full-year predictions were less than 11 billion.
That slows down dramatically. New contracts for NEOM, the flagship project that was meant to represent Saudi Arabia’s modernisation, have dried up. According to reports, an internal audit discovered proof of project managers’ intentional financial fraud. In late 2024, the project’s CEO was discreetly removed.
Who is making money off of this cycle of speculation? Not common Saudis who are facing a housing shortage. According to a 2024 Knight Frank study, more than 115,000 new homes must be constructed every year until 2030 in order to satisfy Saudi national demand.
Early in 2024, the national homeownership rate was 63.74%, much below the Vision 2030 goal of 70%. Meanwhile, rising residential rental costs are making it increasingly difficult for middle-class families to obtain affordable housing. In September 2025, the Riyadh government issued a five-year rent freeze, a clear indicator that price rises were no longer politically feasible.
Landowners, real estate developers with insider knowledge, and foreign construction firms that win large contracts are the true winners. The Saudi government imposed a 2.5% tax on undeveloped urban property nine years ago, raising it to 10% in April 2025 and spreading it to unoccupied structures. These initiatives are intended to reduce speculation and promote development. But taxes rarely stop bubbles when everyone believes prices will keep rising.
The Construction Cliff
The most dangerous moment will come when the construction phases end. Right now, giga-projects employ hundreds of thousands of workers. The Warehousing and Logistics Statistics for 2024 reported 140,000 active Saudi drivers and 302,000 non-Saudi drivers in delivery alone.
Construction crews number in the millions. These workers need housing, which drives residential demand. They need services which drive commercial demand. Remove them when projects are complete or stall, and that demand evaporates.
A similar situation occurred in Dubai during the financial crisis of 2008. Real estate values reached unsustainable heights due to massive development booms. In many places, property values plummeted by 50% or more as projects stopped and liquidity dried up. Years of suffering and reorganisation preceded the city’s eventual recovery. Saudi Arabia benefits from bigger pockets as a result of its oil resources.
In theory, the government can continue funding projects even in recessionary times. However, fiscal capacity is limited, particularly given that oil prices will likely stay low and the budget deficit will increase to 2.5% of GDP in 2024.
“Vision 2030” is creating a genuine economic transformation. Tourism is growing, non-oil GDP is expanding, and new industries are emerging. But the real estate market increasingly looks detached from fundamentals. When commercial land prices jump 12.7% in a single year while rental yields stay around 8.89% in Riyadh, something is not adding up.
Either rents need to rise dramatically to justify land values, or land prices need to correct downward. The government is actively trying to prevent rent increases through freezes and regulations. That leaves only one direction for eventual price adjustment. The only question is whether it happens gradually or all at once.