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Saudi residential costs to keep rising with demand

Saudi residential prices are rising as both nationals and expats seek suitable properties amid a growing population Unsplash+/Yunus Tuğ
Saudi residential prices are rising as both nationals and expats seek suitable properties amid a growing population
  • Saudi rents up by as much as 60%
  • Market waiting for high-quality units
  • Riyadh population soaring

The cost of buying and renting residential and commercial property in Saudi Arabia is likely to continue to increase throughout 2025 and beyond, analysts say. 

Supply has not been able to keep up with the growing demand for housing, concentrated in Riyadh where an itinerant young population, increased economic activity in the non-oil sector, and government homeownership targets are all putting pressure on the sector.

“We’re seeing demand coming in at basically every level of property that’s available, from small apartments all the way up to large villas,” says Faisal Durrani, head of research at real estate consultancy Knight Frank Mena. “There is a tremendous opportunity to attract international developers and investors to come in.”

Knight Frank estimates that Saudi Arabia needs to build 115,000 homes annually over the next six years, to keep pace with demand. Despite there being around a million units currently under construction, the country has so far not been able to bring new property onto the market fast enough.

Building “is putting pressure on every point in the supply chain, be it for construction materials, sites, blue collar workers or skilled workers,” says Durrani. “And, unsurprisingly, land prices are also rising rapidly.” 

Developers in Saudi Arabia can now spend 60 percent of their total overheads on land in some places, pushing housing prices up yet further.

The increase in rents across the country is now the largest single driver of annual inflation, which slowed to 1.9 percent in December, despite the cost of accommodation shooting up by 10.6 percent across the country. 

In Riyadh, Knight Frank believes rents have increased by between 35 and 40 percent in the last three years, and by up to 60 percent in some areas.

“Anecdotal evidence is telling us that there is a lot of internal migration taking place,” says Duranni, “and these are young Saudi nationals moving around the kingdom in search of better employment or career opportunities.” 

He estimates that 50,000 young Saudis have relocated to the capital in the last three years. 

“The challenge we have is that, in Saudi generally speaking, we don’t have professionally managed, built-to-rent stock,” said Duranni, referring to the kind of apartment complexes that proliferate in Dubai: tall buildings with a concierge and amenities.

Across the board, there is a backlog of prospective buyers and tenants ready to move.

“The market is kind of waiting for some of this new, better-quality product to be delivered,” says Matthew Green, head of research at the Saudi real estate services company CBRE. 

As new properties become available, “you’ll start to see quite a lot of migration of residents,” says Green, adding “there’s latent demand from people basically wanting to be out of the accommodation that they’re in”.

Demand from those wishing to buy has also shot up, and first-time buyers are now supported by various government lending programmes. Since 2016, Saudi Arabia has increased the proportion of Saudi homeowners from 17 percent to 64 percent, close to its ultimate target of 70 percent.

In Riyadh, the average price for an apartment reached SAR 5,530 ($1,474) per square metre in mid 2024. That is 40 percent higher than it was four years ago but still around half that of apartments in Doha ($2,831) and less than a quarter of apartments in Dubai ($6,100).

Between January and October 2024, 540 foreign businesses set up regional headquarters in Saudi Arabia. This followed the introduction of rules that require companies to have a regional HQ in the kingdom if they wish to bid for high-value government contracts.

Yet most of the future demand for housing in Riyadh is still expected to come from people who do not yet live there. Knight Frank expects the number of residents to jump from the 7 million recorded in the 2022 census to 9.6 million by 2030; the government ultimately aims to increase the population to between 15 million and 20 million.

More than two-thirds of the new residents are expected to be expatriates. Foreign nationals almost exclusively rent their accommodation, but this could be about to change, following in the footsteps of the neighbouring UAE.

“Just look at all the Neom projects, Red Sea and all the rest of it,” says Green. “[They are] much more oriented towards international investors. That’s a long-term strategy.”

Mike Coady, a Dubai-based financial consultant, says: “I think it’s a bit like the Dubai story. When it starts to get proof in the pudding and momentum, then you’ll get more and more people flooding into that market for the sole purpose of making money.”