Market Overview

The Kingdom’s real estate market finished 2021 with a 26 percent increase in the overall value of its agreements, compared to a 0.15 percent loss in 2020, bringing the year’s total value to SAR 210.5 billion, up from SAR 169.9 billion in 2020. For the third year in a row, extraordinary increases in real estate loans supplied to individuals boosted the predicted level of real estate deal value, which is expected to reach roughly SAR 155 billion in 2021, up from SAR 145.7 billion in 2020.

Saudi Arabia will have a population of approximately 32.3 million by 2021, which will be dominated by young middle-class Saudi Arabians who are first-time house purchasers, as 44.3 percent of the population is under the age of 21. The housing crisis in Saudi Arabia has been exacerbated by the demand from international workers, who number approximately 5.4 million.

With a predilection for residential buildings and more cheap properties among younger people and expatriates, the government is taking efforts, such as rewarding developers to build affordable residential developments, therefore pushing lenders to provide additional home financing choices.

The Saudi Arabian housing ministry announced a proposal to create roughly 19,500 residential units for its people under the ‘Sakani’ housing development program, in order to meet the country’s goal of boosting house ownership among Saudi residents to 63% by 2020 and 77% by 2030.

Saudi Arabia’s real estate sector is showing indications of recovery following the COVID-19 epidemic. The COVID-19 epidemic has wreaked havoc on the Kingdom’s economy, as it has in other countries. Improved commercial activity in the last months of 2020, aided by Vision 2030-related economic changes and a swift reaction to COVID-19, has helped to generate a turnaround in performance in all key real estate industries.

Major Market Trends

The supply of residential units in Saudi Arabia’s major cities is continuing to rise. The government’s Sakani and Wafi initiatives pushed the construction of inexpensive housing in Saudi Arabia in Q-01 2021, resulting in a rise in new residential units. According to the dwelling Ministry’s Housing Data and Observatory Center, new housing supply increased by 31 percent year over year in the first three months of 2021, and by 0.7 percent over the previous quarter.

In addition, the Kingdom of Saudi Arabia built around 360,000 residential units in the previous year (Q-01 2021 to Q-01 2022). Furthermore, in the first quarter of 2021, construction on 105,000 units began, up 19.5% from the same period the previous year, with 109,000 units finished. From the end of 2020 to the beginning of 2021, the average price of a residential unit dropped below SR 498,000. According to Ministry of Justice figures, residential real estate transactions will top 253,000 in 2020.

On the strength of rising demand for residential units, the country’s residential real estate (RRE) sector, which is heavily concentrated in important cities such as Riyadh, Jeddah, Makkah, and Dammam, is expected to grow in the coming years. The expansion in the youthful population, rising income levels, and the presentation of recent government measures targeted at obtaining mortgage finance are expected to provide significant support.

Furthermore, the government is launching a number of programs to enhance the private sector’s task force in order to satisfy the demand for housing units. The Saudi residential market is expected to benefit from the government’s decision to exclude real estate transactions from the 15% Value Added Tax (VAT), the implementation of large-scale housing schemes, and ongoing attempts to expand the mortgage market.

Despite the coronavirus pandemic, the cost of a dwelling unit in the residential real estate (RRE) market grew in 2020, as demand for residential units remained high. Even during the continuing pandemic, the residential property market outperformed the commercial sector, with the price index for the residential sector growing over the previous year through Q-01 2021. The residential sector’s forecast for 2021 remains favorable, thanks to continuing government backing for the industry as part of Saudi Vision 2030’s ambitions.

The Real Estate Development Fund (REDF) of Saudi Arabia has been a primary driver of growth in the country’s residential sector development, as outlined in Vision 2030. The REDF, in collaboration with the Ministry of Housing and other government agencies, unveiled a number of initiatives aimed at meeting the Kingdom’s residential real estate demand and providing affordable housing to Saudi people. We think that by tackling the residential market’s major difficulties, these actions will go a long way toward satisfying the sector’s needs.

The Saudi government is working hard under the Vision 2030 project to expand property ownership in the Kingdom to 73% by 2030. Following government-led programs through the Ministry of Housing, the home ownership rate has steadily increased over the previous several years, rising from 52.7 percent in 2018 to over 63.1 percent in 2020. The need for new residential units is likely to remain strong in the future years, owing to rapid urbanization and a rising number of Saudi residents joining the workforce.

We expect demand for smaller, more inexpensive housing units in the form of flats to stay robust in the housing market, owing to the growing popularity of nuclear families. Residential property demand remained robust in 2020, thanks to the government’s strong support for the industry.

This was reflected in the Saudi Central Bank’s (SAMA) new home mortgage loans statistics for 2020, which showed that 296,596 contracts worth SAR 141.9 billion were issued to Saudi households, equating the previous four years’ total figures (2016 to 2019). Despite the current coronavirus outbreak, mortgage lending is increasing, indicating that home demand in Saudi Arabia is still strong.

Global Residential Real Estate Market

During the projection period, the global residential real estate industry is expected to rise by more than 9%. (2022 -2027).

The COVID-19 epidemic had a number of effects on the residential real estate (RRE) market. On the one hand, lockdowns and the greater usage of remote working practices are anticipated to raise demand for RRE, while supportive monetary policy will likely make it more affordable.

Furthermore, the economic downturn and rising unemployment rates are projected to have a detrimental impact on demand. Because of the lockdowns, most development and property transactions came to a standstill under Covid. However, once the lockdowns were lifted in 2021, the residential real estate (REE) market grew.

The residential real estate sector is the bedrock of every economy’s health. Humans are thought to have a basic need for housing. As a result, it is recognized that the way the residential real estate market operates has a ripple effect that affects large groups of individuals all over the world.

Apartments, bungalows, and villas are examples of housing properties that are purchased and sold on the market. Urbanization drives the residential real estate market in emerging countries. Major cities in emerging countries such as Brazil, China, India and Argentina, among others, are rapidly growing and require more housing to accommodate people relocating from all over the country.

In addition, government policies supporting cheap housing help to expand the market. Governments in Australia, the United States, and Canada, for example, have planned strategies such as first-time buyer incentives, veterans’ subsidies, a golden visa, low-cost affordable housing schemes, and transactional tax reductions, all of which are expected to boost growth in the residential real estate market. Low mortgage interest rates are also boosting the residential real estate market in places like the United States, Canada, India, and Australia.