Is Saudi Arabia’s Real Estate Market Cooling or Heating Up?

Saudi Arabia real estate market is at a pivotal moment…

With major economic reforms, increasing foreign investment, and ambitious mega-projects under Vision 2023, the market is evolving rapidly. But is it heating up or starting to cool?

Rising Home Prices Driven by Urbanization and Growth

Saudi Arabia’s residential property prices are steadily increasing. This is largely due to strong economic growth, rapid urbanization, and government-backed projects. 

• As of 2023, 82.1% of the population lived in urban areas, and this figure is expected to reach 97.6% by 2030 (UN-Habitat).
• The country’s GDP continues to rise, fueling demand for housing, particularly in Riyadh, Jeddah, and Dammam.
• Vision 2030 initiatives like NEOM and The Line attract buyers looking for modern, high-tech living spaces (Arab News, IR Global).

With nearly 60% of the population under 24, the demand for housing will likely stay strong, keeping property prices on an upward trend (Design Space, UN-Habitat).

Boom in Religious Tourism is Fueling Makkah’s Rental Market

Religious tourism is a key driver of short-term rental demand in Makkah.

• In 2023, Makkah welcomed 17.5 million religious tourists, with projections expecting 25-30 million visitors by 2025 (Saudi Visa Office, Arab News).
• The Hajj tourism industry is on track to reach $343.55 billion by 2034, growing at 7.2% CAGR (Future Market Insights).
• Airbnb listings in Makkah surged, with 514 active listings and a 41% occupancy rate, with properties booked for an average of 150 nights per year (Airbtics).

With this demand, rental properties near key pilgrimage sites are seeing strong yields and consistent occupancy.

Foreign Investment Surging with Long-Term Residency Visas

New visa regulations are attracting more global investors:

• Saudi Arabia’s FDI stock rose 13.4% in 2023, reaching SAR 897 billion (AGBI, S&P Global).
• The Premium Residency Permit (PRP) expansion in 2024 has made long-term residency easier for foreign nationals (Fragomen).
• To qualify, foreign buyers must invest SAR 4 million ($1.07 million) in real estate, boosting luxury property sales in Riyadh and Jeddah.

The real estate sector remains a primary beneficiary, with foreign buyers targeting high-end developments and mixed-use communities.

Affordable Housing Supply Growing Amid Regulatory Changes

The government is focusing on closing the demand-supply gap in affordable housing:

• SAR 300 billion has been allocated to housing initiatives under Vision 2030 (Global Business Outlook).
• The Etmam program has streamlined the licensing process, making it easier for developers to launch new projects.
• The White Land program is encouraging landowners to develop vacant plots, increasing supply.
• The Sakani program offers mortgage loans and free land parcels to Saudi citizens.

As a result, more middle-income housing options are becoming available, improving access to homeownership.

Is the Market Cooling in Some Areas?

Jeddah’s residential market is expanding:

• 11,300 new residential units were delivered in the first half of 2024 (Saudi Boom, CBRE Saudi Arabia).
• More modern luxury properties are entering the market, making older rentals less attractive.
• In Riyadh, occupancy rates dropped by 4.4 percentage points in early 2024, hinting at similar trends in Jeddah.

​​However, this oversupply is likely temporary, as Saudi Arabia’s population growth and urban expansion will continue to absorb new developments. 

Major infrastructure projects, including the Jeddah Central Project and Murooj Jeddah, are expected to deliver over 17,000 new housing units by 2027, potentially stabilizing property prices.

What’s Next for Saudi Arabia’s Real Estate Market?

Overall, Saudi Arabia’s real estate market remains in a growth phase

For investors, this means identifying the right opportunities:

• Prime residential areas in Riyadh and Jeddah offer strong capital appreciation.
• Short-term rentals in Makkah continue to generate high yields.
• Affordable housing developments present opportunities for stable returns as demand rises.

Read more about: Why Investing in Saudi Arabia Should Be in Your Playbook 

With Vision 2030 driving long-term real estate growth, Saudi Arabia remains an attractive destination for investors looking for high-value opportunities.

References:

• https://www.designspace.ae/post/saudi-real-estate-rising-demand-and-prices#:~:text=Saudi%20Arabia’s%20residential%20real%20estate%20market%20is%20thriving%2C%20with%20Riyadh,in%20the%20years%20to%20come.
• https://www.statista.com/outlook/fmo/real-estate/residential-real-estate/saudi-arabia
• https://www.realestatesaudi.com/future-of-saudi-real-estate-market-2025-beyond/
• https://sandsofwealth.com/blogs/news/saudi-arabia-real-estate-forecasts#:~:text=The%20Saudi%20luxury%20real%20estate,and%20prestige%20these%20cities%20offer.