Real Estate Financial Update – Saudi Arabia

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  • Published Date: September 26, 2014
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Saudi Arabia has one the strongest economies in the world which is backed by oil and natural gas production. Recent data suggests that the economy expanded by as much as 6% in the recent years creating many jobs. There has been a real estate boom in Saudi Arabia however low cost housing remains a problem. Most of the workforce in Saudi Arabia consists of low to middle income population and they require low cost housing; the Department of Housing in Saudi Arabia has introduced several projects to resolve these issues.

Real Estate Prices

Based on the statistical data collected by Colliers International GCC in 2011 there has been an increase in the prices of villas and apartments in Jeddah & Riyadh. A 15% rise was seen in the sale prices of villas in Jeddah approximating to SAR 3980 where as in Riyadh there was a 9% rise in villas with an average price of SAR 3150 (per sq. m.).

Similarly the prices of apartments have also increased with a 14% rise in price of apartments in Jeddah with an average price of SAR 2450 and an 8% rise in price approaching to SAR 2860 for apartments in Riyadh. If we look at the data for the last decade, there has been a constant increase in the prices of real estate. Data provided by National Commercial Bank Capital from 2002-2005 suggests that housing prices increased by 13.7 % and land prices by 16.5%.

Aqarat4u real estate analysts have recently told that the real estate prices will continue to hike because of the increasing cost of building material that is imported from different countries. Moreover the introduction of “Nitaqat” whereby workers are deported to free up jobs for Saudi nationals has caused many workers to be deported and the construction sector has been severely impacted. All these factors have contributed to the increase in real estate prices.

Low Cost Housing

From the very start Saudi Arabia has had a problem with providing low cost affordable housing to majority of its population. About 80% of the population in Saudi Arabia belongs to the socio-economic class B and C and they require affordable housing. Previously the home ownership was at 35% which was quite low as compared to other parts of the world. The primary reason was the mortgage and financing options by commercial banks.

Saudi Arabian government tackled this problem by passing a law to encourage the commercial banks to offer financing options to users. Moreover to encourage the development of affordable real estate, the REDF (Real Estate Development Fund) was introduced which is funded by the Saudi government.


Rental Yields in Saudi Arabia  

Rent yields are quite high in Saudi Arabia but varies with different cities. Highest rental yields can be found in Mecca and Medina. In 2012 the rent hiked by 17% in Riyadh for villas and 14% for apartments. Similarly for Jeddah the rent soared by 11% for villas and 7% for apartments. The overall statistics clearly show that rate of return on renting real estate in Saudi Arabia is quite high. Currently the same situation exists as Saudi economy has improved further and the current nominal GDP/Capita is $24, 246 which is higher as compared to the previous year.

Financing Options

As interest based transactions are forbidden in Islam so Saudi Arabia follows Islamic financial principles of Ijarah and Istisna for offering home financing options to Saudi nationals. These are fully Sharia compliant products and most banks offer financing of up to SAR 5,000,000 with a maximum period of 20 years.


Saudi government has implemented many laws to encourage real estate development in the country. Foreign investors are highly recommended to invest in real estate property and take advantages of the favorable laws. The prices however are high but so is the rental yield and if you rent a property in Saudi Arabia then you will definitely get high returns. For more information contact Aqarat4u and we will provide you with all the help you need.

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