Mortgage contracts registered in Saudi Arabia reached 24,482 in the second quarter of 2024, an annual rise of 12 percent, according to real estate firm Jones Lang LaSalle.
The total value of these agreements stood at SR18 billion ($4.86 billion), marking an 8 percent rise year-on-year. A report from the company argued that this growth in mortgage activity underscores the ongoing demand for residential properties and reflects the government’s commitment to supporting homeownership among its citizens.
As a result of this rising need, the Kingdom’s property market is experiencing a significant expansion, with a notable increase in housing supply in key cities like Riyadh and Jeddah. According to the report, the total residential stock in Riyadh reached 1.46 million units in the first half of the year, while Jeddah’s inventory stood at 891,000.
This expansion aligns with the Kingdom’s ongoing efforts to accommodate a growing population and meet the rising demand for independent living arrangements. In the first half of 2024 alone, Riyadh delivered approximately 16,200 residential units, and Jeddah added around 11,300 units to its housing stock.
These numbers are expected to increase further in the second half of the year, with an additional 16,000 projected for both cities. This robust supply growth is driven by several factors, including the younger generation’s preference for independent living and Saudi Arabia’s broader goals under its Vision 2030 initiative, which aims to enhance the quality of life for its citizens through urban development and housing sector expansion.
The surge in housing supply has sparked an innovation wave in housing design, catering to the evolving needs and preferences of the younger demographic. However, this rapid development is not without its challenges.
Developers face hurdles, particularly in Riyadh, where rising land costs present a significant concern. Furthermore, the sector is grappling with volatile construction expenses influenced by global economic headwinds, capacity constraints in the local market, increasing shipping expenses, and high financing prices. These factors have led to delays in some scheduled deliveries, prompting owner-occupiers and investors to adopt a cautious, wait-and-see approach.
In terms of market performance, Riyadh recorded a 10 percent year-on-year increase in sale prices and a 9 percent rise in rental rates as of June 2024, indicating strong demand and a robust market. Jeddah also demonstrated growth, albeit at a slightly slower pace, with a 5 percent increase in sale prices and a 4 percent rise in rental rates.
Despite these challenges, the residential market remains resilient. Developers are adapting to the evolving landscape by managing costs and optimizing construction processes to ensure the continued delivery of new housing.
The anticipated addition of another 16,000 units in Riyadh and Jeddah in the latter half of 2024 suggests that the Kingdom is on track to meet the rising demand for residential properties, thereby contributing to the broader goals of Saudi Vision 2030.
