According to S&P Global Ratings, Saudi Arabia’s residential real estate market is expanding steadily, with the number of new homes and mortgages rising in line with the nation’s goal of homeownership.
According to S&P Global Ratings’ most recent report, “Saudi Residential Real Estate: The Market Is Booming,” the kingdom’s booming residential real estate market is a reflection of both strong growth fundamentals and a predominantly youthful population of over 35 million.
S&P believes that Saudi Arabia’s population growth and economic indicators will continue to be robust.
“We believe that Saudi Arabia’s economic indicators and population growth will remain strong, and that new household formation and declining interest rates will support the demand for residential mortgages “ said S&P Global Ratings credit analyst Sapna Jagtiani.
“We expect that demand for residential real estate will remain high, particularly in Riyadh and Jeddah, thanks to robust population growth of 3.3% on average over 2024-2027, driven by domestic migration and partly by expat inflows,” she stated.
The top ratings agency noted that the regulatory changes and reforms to the visa policy may increase direct foreign investment in the real estate industry.
However, it noted that rising construction costs and competition for funding from other Vision 2030 projects are two major obstacles facing private real estate developers.
According to S&P, new household formation and falling interest rates are driving the growth of residential mortgages in Saudi Arabia, while residential real estate prices and rents are also continuing to soar.
According to the KSA Market Dynamics Report H1 2024 by real estate consulting firm JLL, sales prices in the cities of Riyadh and Jeddah increased by 10% and 5%, respectively, in the first half of 2024.
Additionally, rental yields are still high, growing 9% and 4% annually in Riyadh and Jeddah, respectively. According to the global real estate company Knight Frank’s Saudi Arabia Residential Market Review – Summer 2024, the total number of real estate transactions across all asset classes increased by 38% to just over 106,700 in the first half of 2024, while their total value increased by 50% to SAR127.3 billion.
S&P Global Ratings believes that Saudi Arabia’s population growth and economic indicators will continue to be robust.
“We recently revised the outlook on our sovereign ratings on Saudi Arabia to positive from stable to reflect our view of the country’s strong outlook for non-oil growth and its economic resilience to volatile oil prices,” stated the top ratings agency.
“Saudi Arabia and the rest of the GCC region have not seen much impact from the conflict in the Middle East, with debt yields remaining broadly stable and tourism inflows robust,” said the report.
“However, if tensions were to escalate, we could see a higher risk premium on debt; weaker tourism, foreign direct investment, and capital inflows; and more pressure on defence spending. This, in turn, could prevent Saudi Arabia from achieving some of its Vision 2030 targets,”.
