Saudi Arabia’s real estate sector has doubled its contributions to the country’s economy last year from 5.9 percent in 2023 to around 12 percent in 2024. This surge was supported by new legislation streamlining regulations, including over 20 new regulations that aim to facilitate development and boost investor confidence.
In its latest Saudi report, CBRE Middle East noted that this growth is reflected in various metrics with 192 real estate project licenses issued in 2024, whilst the construction sector added 3,800 new licenses, a 59 percent jump in Q4.
Mecca and Medina real estate markets open to foreign investment
A key 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, a core initiative of Vision 2030. This allows foreign investment in publicly traded companies with property holdings in the Holy Cities, aiming to boost liquidity and capitalize on the lucrative Hajj and Umrah pilgrimages.
While direct investment in Hajj-related companies remains restricted to a 49 percent foreign ownership cap, investors can participate through Tadawul-listed companies or convertible debt. This initiative is supported by over 130 foreign real estate investment licenses, demonstrating strong investor confidence.
Property values in Riyadh rise over 6 percent
Saudi Arabia’s residential real estate market is expected to experience significant growth over the next few years, driven by a strong economic foundation, rapidly growing population, positive demographics and increasing demand for new homes, particularly in Riyadh, Jeddah and Dammam.
This demand is driving prices and rental rates higher, a trend that is expected to continue, with the value of new residential mortgages in the Kingdom rising 17 percent year-on-year in 2024. The strong market growth is reflected in rising property values in Riyadh, with average prices increasing by over 6 percent in the past year.
As new, high-quality units enter the market, prices are anticipated to continue to rise in 2025. In Riyadh, the villa market has seen steady growth, with average prices now approaching SAR6,000 per square meter. In Jeddah, apartment values are slightly lower, averaging approximately SAR4,000 per square meter, while villa values are notably higher, reaching nearly SAR5,700 per square meter.
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Riyadh office rents rise 18 percent
In Saudi Arabia’s real estate market, demand for space in Riyadh’s office sector remained strong through year-end 2024, though transactional activity is now clearly being constrained by the lack of space for immediate lease and occupation.
The high occupancy rates across the capital’s prime office districts reflect the strong prevailing demand, driven by the Kingdom’s thriving non-oil economy which is a key component of the government’s Vision 2030 diversification strategy.
In the 12 months to Q4 2024, occupancies have remained close to capacity and rental rates have also continued to move upwards, with Riyadh experiencing a substantial 18 percent increase in average rents.
Growth in Jeddah and Dammam was less pronounced, at approximately 10 percent and 12 percent, respectively, highlighting the particularly acute supply challenges in Riyadh. The surging demand and subsequent scarcity of accommodation is also reflected in other broader market trends, including landlords seeking to maximize opportunities in new leases and renewals.
Despite the rapidly rising rents, global occupiers and investors remain attracted to the Kingdom, as reflected in the continuation of the RHQ license growth through Q4.
