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Saudi Arabia’s real estate market to grow despite affordability concerns: S&P

Saudi Arabia's real estate market will continue to grow, thanks to the government's ambitious plans and evolving consumer preferences, S&P Global Ratings said.

However, affordability issues and execution risks will need careful navigation amid macroeconomic pressures and relatively high interest rates.

The country's population growth, its Vision-2030-related activity, and supply shortages in large urban centres will likely keep fuelling the market, credit analyst Sapna Jagtiani said.

Mortgages from Saudi banks have been the main source of real estate financing over the past few years, growing to $180 billion, or 23% of all loans, as of the end of 2024.

“We expect interest rate cuts will boost mortgage growth after a moderate slowdown in 2022-2023,” she said, adding that off-plan mortgages are becoming the norm, which could expose banks to developers’ execution risk.

The government remains the key driver of residential real estate growth, with its homeownership targets (70% home ownership by 2030, 65.4% achieved in 2024) and funding support to nationals.

S&P expects a strong pick-up in residential transaction volumes and values in 2025, given the government’s initiatives to increase home ownership. 

Moreover, the growth will be backed by strong demand in major hubs such as Riyadh and Jeddah due to growth in economic activity and Mecca and Madinah due to increased religious tourism.

Higher costs of home ownership will quickly change consumer preferences but offer an opportunity for sector transformation, Jagtiani said.

“Living in apartments instead of villas and townhouses is becoming more socially acceptable. Buyer preferences are skewing toward off-plan mortgages rather than ready-to-move-in homes," she added.