This trend shall continue even in 2025, as a result of the continued demand, economic diversification, and heavy government expenditure.
Residential Property Surge
The residential real estate market has also experienced remarkable increases in property values. The capital city, Riyadh, has seen average property prices advance by more than 6% over the past year. Jeddah similarly recorded a 5% increase in sales prices during the first half of 2024. This spike in prices is driven by increased demand- rising population and influx of expatriates.
The trend was replicated in the rental markets where Riyadh’s rental yield witnessed an annual increase of 9% while Jeddah saw a slight increase of 4%. These increasing rental rates stem from a scarce housing market as well as the increased cost of living displaced from urban centers.
Commercial Real Estate Dynamics
While the commercial real estate sector witnessed some resilience, demands continued within Riyadh’s office market, with Grade A occupancy rates reportedly hitting an all-time high of 98% in Q4 2024.
This high occupancy figure results from a lack of prime office stock and a persistent level of business confidence.
Following in the footsteps of all such demand becoming quite huge, Riyadh, by 2028, expects to add over 1.6 million square meters in Grade A office capacity.
This growth is intended to provide space for multinational companies and the economic diversification of the Kingdom.
Economic Diversification and Vision 2030
Saudi Arabia Vision 2030 is considered to be of great importance and an influential growth driver for the real estate segments.
Reducing oil dependency has led the government to engage in investments in infrastructure, tourism, and entertainment sectors, thus subsequently facilitating the growth of real estate development. NEOM mega-projects such as the Red Sea Project will redefine luxury living and attract the international investor community.
According to the Real Estate General Authority, the property market in the Kingdom of Saudi Arabia is projected to grow by 69.51 billion dollars in 2024 and reach 101.62 billion dollars by 2029, pinning its hopes on an average annual growth rate of 8%.
Such signs are indicative of the commitment the government has devoted towards the transformation of the real estate sector into a pillar of the national economy.
Challenges: Affordability And Accessibility
Nevertheless, there are still effects that remain; such is the case of affordability in housing. In Riyadh, real estate prices have grown significantly after the onset of the pandemic, with prices for houses increasing by 81% and those of apartments by 56 % from 2020.
This soaring appreciation in a short time has made it more challenging to own homes for many Saudis especially when the government is planning a home ownership rate of 70% by 2030.
To counter this aspect, the National Housing Company undertook the construction of more than 30,000 housing units, and state-subsidized bank loans for housing have been implemented. However, the incongruence between market prices and the average citizen’s purchasing power remains a challenging issue.
Investor Sentiment and Future Outlook
Investor confidence is still pumped in the real estate market of Saudi Arabia. The Cityscape Global 2024 event sealed transactions of over $61 billion, demonstrating the sector’s vibrancy and potential.
The GCC for the year reported real estate transactions in excess of $383 billion, with a big chunk attributed to Saudi Arabia.
Imagining moving forward, real estate in Saudi Arabia will reach its full glory in 2025 when the economy recovers from the recession, interests drop, and the government makes attractive, competitive policies.
Sustained growth for foreign and national investors alike will arise from continuing focus on mega projects, infrastructure development, and regulatory reform.
Conclusion
The transformation of Saudi Arabia’s real estate is currently in the phase, in that property values are rising, rental markets are thriving, and colossal investments, leading to transformation in operational efficiencies, are orchestrated in line with Vision 2030.
Housing affordability is still a challenge but optimistic signs with growth expected in the years to come are still persisting. Stakeholders, from developers to investors to policymakers, should work together to see to it that the market’s growth also extends to the wider population and thus contributes to the Kingdom’s long-term economic welfare.
