Real estate is the second largest economic sector in Saudi Arabia after the oil sector. The real estate sector is currently witnessing the implementation of many development plans. Including the Saudi government’s plans to create 300,000 housing units between 2022 and 2025. According to forecasts, the size of the real estate market in Saudi Arabia is expected to witness significant growth. Its value will rise from 241 billion riyals in 2023 to more than 353 billion riyals by 2028, according to estimates by the General Real Estate Authority.
In addition, many companies working in the field of building and construction seek to adopt the latest technologies and construction technology, which has contributed to keeping pace with modern developments in the real estate sector. These technologies and innovations aim to improve productivity efficiency, reduce costs, and achieve more quality in real estate projects. These efforts reflect the companies’ commitment to continuous development and improving performance to meet the needs and aspirations of the growing market in the Kingdom of Saudi Arabia. A recent report also confirmed that the Saudi real estate market has witnessed a noticeable improvement over the past two years. Especially in the capital, Riyadh, where the main activity is focused on the residential sector, while commercial products are witnessing a decline in demand.
The report issued by KPMG, a company specializing in professional consulting, explained that there are factors influencing the real estate market in Riyadh. Including the volume of local spending on the sector, which is expected to exceed 222 billion riyals ($59.2 billion) during the current year. It will reach 230.65 billion riyals ($61.5 billion) next year, and reach 265.29 billion riyals ($70.7 billion) by 2030.
You can also read about commercial real estate in Saudi Arabia: investment opportunities and growing challenges
Price changes vary between different regions of the Kingdom
The Riyadh region clearly leads the scale of positive price changes during the fourth quarter of 2022. Real estate prices there annually increased by 4.1 percent, more than double the change volume in the rest of the Kingdom. Densely populated areas significantly influenced changes in the Kingdom’s general real estate index. Such as Riyadh, Mecca, and the Eastern Province. Riyadh clearly appears as one of the most prominent regions that contributed to the positive rise in the general real estate index in the Kingdom.
Following Riyadh, the Jizan region showed a positive change rate of approximately 4 percent, a notably high figure. However, its contribution to the Kingdom’s overall changes is lower due to its lower population density compared to other regions. Other regions of the Kingdom also recorded differences in the direction and levels of change in real estate prices. Real estate prices increased annually in Makkah Al-Mukarramah, Asir, Hail, Al-Jawf, and the Eastern Province, with rates ranging between 0.1 percent and 0.9 percent. Conversely, regions like the Northern Region, Tabuk, Al-Qassim, Medina, Najran, and Al-Baha experienced a decline in real estate prices, ranging between 0.1 percent and 2.2 percent.
These percentages confirm the changes witnessed in real estate prices, the impact and importance of the most densely populated areas in the general real estate index. Indeed, Makkah Al-Mukarramah, Asir, Hail, Al-Jawf, and the Eastern Province stand out for their positive impact on the real estate market. While other regions, such as the Northern Region, Tabuk, Al-Qassim, Medina, Najran and Al-Baha, show a decline in real estate prices. Which reflects a discrepancy in demand and supply in these regions.
Supply of residential real estate in Riyadh
The supply of residential real estate in Riyadh witnesses great diversity that meets the needs of different segments of society. The offerings include a variety of residential units, from luxury apartments in high-end residential towers to luxury villas and townhouses in premium residential communities. The Riyadh residential real estate market offers diverse options in space, design, and location, catering to various preferences. The exhibits include apartments with modern and elegant designs. Which are available in a variety of upscale neighborhoods within the city and new residential communities in suburban areas.
In addition to apartments, there are a variety of villas and luxury homes throughout Riyadh. These units feature spacious layouts, modern designs, and luxurious amenities, making them ideal for families seeking comfort and luxury. Many factors affect the supply of residential real estate in Riyadh, including residential demand, economic developments, and government trends in real estate development. The Saudi government seeks to strengthen the real estate sector and provide affordable housing to citizens. Which enhances the supply of residential real estate in the capital, Riyadh.
Deloitte’s recent reports indicate that the supply of residential real estate in Riyadh will increase by 1% during the fourth quarter of 2023. According to these reports, the number of units available reached 3.8 million units at that time. The following table also shows the numbers, according to what Argaam published.
Residential and commercial real estate price changes
The data shows that most of the changes in real estate prices in the Riyadh region come from residential real estate, as they rose by 6.8 percent, exceeding the general average in the Kingdom by two and a half times. This increase focuses during the period on residential land prices, which rose by an approximate rate of 7 percent. Apartment prices increased by 2.8 percent, indicating a shift in residential demand in the Kingdom towards apartments. On the other hand, commercial real estate prices in Riyadh increased by 0.4 percent. While it declined in the rest of the regions, with the exception of Hail, Najran and Tabuk, which are less important in the overall index.
The Riyadh region and the city of Riyadh in particular play a vital role in economic changes. It is usually considered a meeting point for development and growth in the Kingdom. The value of real estate transactions usually exceeds 90 percent of the total value of transactions in the Riyadh region. Big cities are considered an essential engine for economic and service progress, as economic and governmental activities are concentrated in them, and jobs are increasing more than in other regions. This encourages immigration and increases the demand for real estate. Recently, Riyadh has witnessed an increase in recreational activities and has returned to recovery after the repercussions of the Covid-19 pandemic. Which increased the demand for tourist and service real estate in general.
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