The real estate market in Saudi Arabia is experiencing significant growth due to increasing interest from investors and buyers, either locally or internationally. While foreign investment has greatly contributed to the market's success, experts say the primary revenue generator for Saudi’s residential property market remains local buyers.
HOMEOWNERSHIP RATES
The Saudi market has evolved significantly over the last decade and appears to be on track to continue its growth trajectory. The government has enacted several policies designed to stimulate the real estate sector, as part of its Vision 2030 strategy.
The plan is a long-term program to improve the standard of living in Saudi Arabia, including providing world-class housing for its citizens.
Faisal Durrani, Head of Middle East Research at Knight Franck, says that homeownership rates are at 67% or 68%. This is expected to increase as more housing projects get built and sold.
AFFORDABILITY
Despite the growth of the real estate market in Saudi Arabia, affordability has become a recent concern. The average budget for most Saudis is below SAR1.5 million ($400,000), but prices have risen by nearly 50% in the last 12 months alone.
As a result, home sales have plummeted in Saudi Arabia. "In fact, year-on-year, Riyadh has registered a 57% drop in home sales. In Jeddah, home sales volumes have slipped by 67%," says Durrani.
IMPACT OF GIGA PROJECTS AND LUXURY HOMES
Another factor to consider is the expected pricing of homes in the Kingdom's giga projects. It is anticipated that most of these properties will be priced above $1 million, placing them out of reach for the average household. If demand from foreign buyers and other external sources does not increase, there may be an oversupply of luxury homes in the next five to 10 years.
While the majority of Saudi nationals still aspire to live in large three-or four-bedroom villas, the dynamics of demand are shifting. Durrani reports that 68% of Saudi citizens consider themselves temporary residents in the cities where they live and work because of internal migration.
Thus, demand for rental properties with community facilities, amenities, and professionally managed buildings is increasing. However, as the country’s young people grow older and start to settle down, they are likely to move into more suburban neighborhoods where housing is larger.
HOUSING DEVELOPMENT PIPELINE
The Kingdom has seen a lot of development in real estate recently and is looking to expand even more.
For instance, the NEOM project is a groundbreaking smart city endeavor that reimagines urban living. This visionary project is designed as a futuristic vertical city, designed to have no cars, streets, or carbon emissions.
Another prominent project is the Red Sea Project, located on Saudi Arabia's western coast. This luxury tourism and residential development is crafted as a sustainable destination, with a strong emphasis on eco-friendly design and conservation.
Moreover, as part of the Kingdom's 2030 vision, the $20 billion Diriyah Gate aims to add 20,000 homes to Riyadh's residential stock by its completion in 2027.
Other developments that are contributing to the supply include Unified Development Company’s The Esplanade project in Riyadh; as well as Kun Investment’s 11 West property in Jeddah.
NATION OF HOMEOWNERS
Complementing these ambitious housing developments is Roshn Group, backed by the Saudi Public Investment Fund. With a plan to create integrated communities, Roshn aims to provide housing for over 2.2 million people by 2030. Their efforts aim to turn Saudi Arabia into a nation of homeowners, fostering a sense of ownership and community among its residents.
"Saudi Arabia is embarking on a massive home-building initiative with the end goal of having 70% of Saudis owning own homes by 2030. This is made possible by the Saudi Government’s incredible support for the real estate sector," said David Grover, Roshn Group’s chief executive officer.
Grover says Roshn is bringing something completely new to the Saudi market. “Unlike traditional urban planning that prioritizes cars, our community-based approach is centred on people. We facilitate enjoyable and fulfilling lifestyles by strategically locating health, education, sports, retail, and entertainment amenities within walking distance of every home," he continues.
Overall, these projects are part of Saudi Arabia’s grand vision to transform the housing landscape in the Kingdom, offering innovative, sustainable, and well-designed residential options for citizens and foreign investors alike.
POSITIVE SHIFT
The Saudi market is witnessing a positive shift in its domestic property market. This is largely being driven by government initiatives, demand from the population, and ambitious project developments.
These trends are expected to shape the housing landscape in Saudi Arabia, providing a strong base for the industry’s future growth.
