Saudi Arabia’s residential housing market cooled in the first half of 2026 due to headwinds like the Iran war’s economic fallout, affordability pressures, and a drop in mortgage issuances, said a survey conducted by real estate consultancy Knight Frank MENA.
“Residential transaction volumes fell by half in Q1 compared to the same period in 2025. The total value of sales fell further by 57% to just SAR22 billion (USD 5.9 billion). The slowdown was even more pronounced in Riyadh, where transaction volumes and sale prices fell by 82%,” the report noted.
“The decline continues a fall in house prices and sales in the capital that began before the war, owing largely to government initiatives aimed at bringing down housing costs. They included a rent freeze and a tax increase on unused or undeveloped land. In the last quarter of 2025 Saudi house prices fell on average for the first time in five years,” it added further.
“Predictably, the regional conflict has added to the weight of factors contributing to the slowdown in residential sales activity that was evident well before the regional conflict began,” said Faisal Durrani, head of research at Knight Frank Mena, in a note accompanying the report.
As per the real estate consultancy, “there is heightened nervousness amongst prospective buyers who are unwilling to make what is likely to be their largest financial commitment during a time of elevated regional geopolitical uncertainty.”
“For some households, the prospect of getting a ‘better deal’ should prices retreat as a result of the conflict is also another important consideration,” it added further.
Knight Frank also reported an increase in “affordability pressures” for would-be homeowners as property prices grew steeply between 2019 and 2025, doubling in some parts of the Gulf major. Knight Frank’s report, however, will force the policymakers to think again on the affordability aspect.
As part of its “Vision 2030” socio-economic diversification agenda, Saudi Arabia intends for 70% of its citizens to be homeowners by the end of the decade. It is currently at 66%, up from 47% in 2016.
“Despite a fall in transactions, housing prices in Riyadh continued to grow in the first quarter compared with the same period in the previous year,” the report said.
“Apartment values in Riyadh increased by 6.3% year on year during the period, while villa values rose by 4.9%. At the same time, the total value of mortgage issuances has fallen dramatically,” said the monthly data released by the Saudi Central Bank.
“In the first quarter of the year banks signed SAR2.4 billion of new mortgage contracts, a third less than the previous year and the lowest amount of any first annual quarter since 2018,” it added further.