Saudi Arabia’s Cabinet, chaired by Crown Prince and Prime Minister Mohammed bin Salman, has approved a new law governing property ownership by non-Saudis. This move will pave the way for new investment opportunities and anticipated deals within the sector. It is expected to facilitate an increase in foreign investments flowing into the Kingdom, the Saudi Press Agency (SPA) reported.
The decision follows a public consultation conducted by the Ministry of Investment last April, gathering opinions on amendments to the regulations surrounding non-Saudis owning and investing in real estate. The Ministry added that these amendments aim to “raise and improve the efficiency and effectiveness of procedures and controls related to non-Saudis owning and using real estate or benefiting from it in cities and economic regions in the Kingdom targeted for development,” which includes the cities of Mecca and Medina.
Attracting foreign direct investment
Majid Al-Hogail, Saudi minister of Municipal, Rural Affairs and Housing, commented that the new law is designed to enhance the real estate sector and attract foreign direct investments to bolster housing supply across the Kingdom. Al-Hogail, who also serves as chairman of the Real Estate General Authority (REGA), emphasized that the law safeguards citizen interests by introducing mechanisms to regulate the market and ensure a balance in real estate.
The law permits non-Saudis to own property within designated geographic zones, notably in Riyadh and Jeddah, while imposing special conditions for Makkah and Madinah. REGA will be tasked with defining the approved zones for non-Saudi ownership and preparing executive regulations for the law, which will be made available for public consultation on the Istitlaa platform within 180 days.
Set to take effect in January 2026, the law aligns with existing regulations governing premium residency and current rules that allow GCC nationals to own property for residential or investment purposes.
Read more: Saudi Arabia real estate index jumps 4.3 percent in Q1 on 5.1 percent residential surge
Notable growth in real estate contribution to GDP
Last year, Saudi Arabia’s real estate sector doubled its contributions to the country’s economy, rising from 5.9 percent in 2023 to around 12 percent in 2024. This remarkable growth was supported by new legislation aimed at streamlining regulations, including over 20 new rules designed to facilitate development and boost investor confidence.
CBRE Middle East reported that this growth is evident in various metrics, with 192 real estate project licenses issued in 2024. The construction sector added 3,800 new licenses, marking a 59 percent increase in Q4.
A significant development in Saudi Arabia’s real estate market last quarter was the opening of the Mecca and Medina real estate markets to foreign investment through listed real estate developers. This initiative is a core component of Vision 2030, allowing foreign investment in publicly traded companies with property holdings in the Holy Cities, thereby aiming to enhance liquidity and capitalize on the lucrative Hajj and Umrah pilgrimages.
While direct investment in Hajj-related companies remains limited to a 49 percent foreign ownership cap, investors can engage through Tadawul-listed companies or convertible debt. This initiative is backed by over 130 foreign real estate investment licenses, highlighting robust investor confidence.
Rising prices and rental rates
Saudi Arabia’s residential real estate market is poised for substantial growth in the coming years, driven by a solid economic foundation, a rapidly growing population, positive demographics, and increasing demand for new homes, particularly in Riyadh, Jeddah, and Dammam. This rising demand is pushing prices and rental rates higher, a trend expected to persist, with the value of new residential mortgages in the Kingdom increasing by 17 percent year-on-year in 2024. The strong market growth is evident in rising property values in Riyadh, where average prices have surged by over 6 percent in the past year.
As new, high-quality units enter the market, prices are projected to continue rising in 2025. In Riyadh, the villa market has shown steady growth, with average prices nearing SAR6,000 per square meter. In Jeddah, apartment values are slightly lower, averaging around SAR4,000 per square meter, while villa values are significantly higher, approaching SAR5,700 per square meter.
High occupancy rates reflect economic growth
In Saudi Arabia’s real estate market, demand for office space in Riyadh remained strong through year-end 2024. However, transactional activity is now being constrained by the limited availability of space for immediate lease and occupation. The high occupancy rates across the capital’s prime office districts reflect robust demand, driven by the Kingdom’s thriving non-oil economy, which is a key aspect of the government’s Vision 2030 diversification strategy.
In the 12 months leading to Q4 2024, occupancy rates have remained close to capacity, with rental rates continuing to rise. Riyadh experienced a significant 18 percent increase in average rents, while growth in Jeddah and Dammam was more modest at approximately 10 percent and 12 percent, respectively, underscoring the particularly acute supply challenges in Riyadh. The surging demand and subsequent scarcity of accommodation are also manifested in broader market trends, including landlords seeking to maximize opportunities in new leases and renewals.
Despite the rapidly rising rents, global occupiers and investors continue to be attracted to the Kingdom, as evidenced by the ongoing growth of RHQ licenses through Q4.
