According to S&P Global Ratings, the government’s ambitious objectives and changing consumer tastes will support Saudi Arabia’s real estate market’s continued growth.
However, given macroeconomic headwinds and comparatively high interest rates, navigating affordability concerns and execution risks will require careful attention.
According to credit expert Sapna Jagtiani, the country’s population expansion, Vision-2030-related activities, and supply constraints in major cities will probably continue to drive the market.
Over the past few years, Saudi bank mortgages have emerged as the primary source of financing for real estate, reaching $180 billion by the end of 2024, or 23% of total loans.
“After a moderate slowdown in 2022-2023, we expect interest rate cuts to boost mortgage growth,” she stated, adding that off-plan mortgages are increasingly prevalent, which may expose banks to execution risk from developers.
With its funding assistance for citizens and its home ownership goals (70% by 2030 and 65.4% in 2024), the government continues to be the primary force behind the rise of residential real estate.
Because of the government’s efforts to promote home ownership, S&P anticipates a robust increase in residential transaction volumes and values in 2025.
Furthermore, increasing demand in important hubs like Mecca and Madinah from rising religious tourism and Riyadh and Jeddah from growing commercial activity will support the rise.
Jagtiani said higher home ownership costs will quickly change consumer preferences but offer 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 mortgages rather than ready-to-move-in homes,” she noted.
According to Saudi Arabia’s economy and planning minister, the Kingdom’s growing real estate industry is playing a significant role in boosting the Gulf major’s GDP.
Faisal Al-Ibrahim told Al-Arabiya Business that his government has made it possible for the private sector to concentrate on making high-quality investments in real estate development by creating an enabling environment.
The government’s larger attempt to stabilise the Riyadh real estate market coincides with those comments. Restrictions on land transactions and development in northern Riyadh were lifted as part of a set of measures announced by Crown Prince Mohammed bin Salman to combat rising land prices and rental costs.