Despite a significant drop in residential transaction volumes in the first quarter of 2026 due to regional conflict, the long-term fundamentals of Saudi Arabia’s housing market remain strong, according to global property consultancy Knight Frank.
Transaction Volumes Decline Amid Conflict
Residential transaction volumes fell 50 percent year on year in Q1 2026, with transaction values declining 57 percent to SR22 billion ($5.86 billion). The slowdown was most pronounced in Riyadh, where volumes and values dropped 82 percent compared to the same period last year. Jeddah, the Dammam Metropolitan Area, Makkah, and Madinah also recorded weaker activity.
Uncertainty caused by the Iran war, which began on Feb. 28, was cited as a key factor behind the decline, along with affordability pressures and weaker mortgage activity. New residential mortgage contracts declined 25 percent year on year during the first four months of 2026, while the total value of mortgage lending fell 34 percent.
Underlying Demand Remains Robust
Despite softer market activity, Knight Frank emphasized that underlying housing demand remains robust, supported by population growth, rising homeownership rates, and ongoing government housing initiatives. Faisal Durrani, partner and head of research for the Middle East and North Africa at Knight Frank, told Arab News: “The long-term demand fundamentals underpinning the Kingdom’s housing market transcend the ongoing regional conflict. We forecast the need for 830,000 homes nationwide by 2034 when factoring for the growing Saudi-national population alone.”
Government Initiatives and Vision 2030
Saudi Arabia’s property sector remains a central pillar of Vision 2030. The Real Estate General Authority expects the Kingdom’s property market to reach $101.62 billion by 2029, with a compound annual growth rate of 8 percent from 2024. Homeownership has risen from 47 percent in 2016 to over 66 percent in 2025, supported by programs like Sakani, Tawazon, and large-scale developments by the National Housing Co.
Earlier this year, Saudi Arabia introduced a framework allowing non-resident foreign ownership of real estate, one of the most significant market liberalizations to date. Knight Frank said the reforms are expected to strengthen investor confidence, improve transparency, and support long-term demand across both residential and commercial real estate.
Price Resilience and Supply Expansion
Despite weaker sales activity, residential prices continued to rise across most major markets. Apartment values in Riyadh increased 6.3 percent year on year in Q1, while villa prices rose 4.9 percent. Apartment values in Jeddah and the Dammam Metropolitan Area climbed 2 percent and 2.3 percent, respectively. Knight Frank noted that price resilience reflects market conditions before the full impact of regional uncertainty became visible.
Saudi Arabia’s housing supply is set to expand significantly. Riyadh’s residential stock is forecast to grow from about 2.7 million units in 2025 to more than 3.3 million units by 2030. Housing stock in Jeddah is projected to reach 1.47 million units, while supply in the Dammam Metropolitan Area is expected to approach 1 million units over the same period.
Office Market and Foreign Investment
Saudi Arabia’s office market continued to demonstrate strong fundamentals during Q1. Grade A office rents in Riyadh rose 2.5 percent year on year to SR2,770 per sq. meter, with occupancy levels at 97 percent. Demand has been supported by the Regional Headquarters Program, which has attracted over 700 multinational companies, exceeding the original Vision 2030 target of 500.
Foreign investment activity also strengthened, with the number of foreign investment licenses increasing from 4,615 in Q1 2025 to 5,516 in Q1 2026. Knight Frank said demand for premium office space remains strong despite regional uncertainty. However, rising construction costs, higher freight and fuel prices, and ongoing supply chain disruptions could delay new office developments and prolong the shortage of high-quality space in Riyadh.
Affordability Challenges
Addressing affordability challenges will be key to unlocking demand from both domestic and international buyers, according to Durrani. “The key moving forward to unlocking the pent-up housing demand from domestic and international buyers will be to address the imbalance between buyer budgets and planned housing stock. This is where we see the biggest market gap today,” he said.
