<But more important than the decision is its expected impact on the market in the coming years, especially in terms of supply, demand, and prices until 2030.
Ejar data indicates that the value of real estate rental transactions in the Kingdom reached about 76 billion riyals in 2022, of which 35.1 billion riyals were for residential rentals alone. With continued population and economic growth, the residential rental market is expected to reach about 100 billion riyals annually by 2030, with continued demand for residential units in major cities such as Riyadh, Jeddah and Dammam.
Residential rentals are expected to reach about 100 billion riyals annually by 2030.
Annual growth rate in the rental market
The annual growth rate in the rental market is estimated to be around 7%, driven by urbanization, increasing expatriate employment, and rising household incomes, making the rental market one of the most important economic indicators in the Saudi real estate sector.
Rental market is one of the most important economic indicators in the Saudi real estate sector.
<Over the past years, major cities have witnessed significant increases in rents as a result of three main factors:
Population growth and internal migration: The Kingdom's population exceeds 35 million, with an annual growth rate of approximately 3.3%, while a large proportion of the population is moving towards major cities.
Economic boom and megaprojects: Projects associated with Saudi Vision 2030 have attracted global companies and educated individuals, increasing demand for housing.
Supply-Demand Gap: Market estimates suggest that 825,000 new housing units are needed by 2030 to meet growing demand.
This equation is the reason why some cities have recorded annual increases of over 10% in rents, while some neighborhoods in Riyadh have seen increases of up to 50% in recent years.
This equation is why some cities have recorded annual increases of over 10% in rents, while some neighborhoods in Riyadh have seen increases of up to 50% in recent years.
Supply-Demand Gap.
The impact of the notice period on supply and demand
<Based on the current data, the following scenarios can be expected:
Market Outlook to 2030 Market Outlook to 2030 Market calming and stabilizing factors Market calming and stabilizing factors.
In the final analysis, we can confirm that the decision to extend the notice period by 365 days represents an important step towards the maturity of the Saudi real estate market, as it moves the relationship between landlord and tenant to the stage of institutional regulation and reduces sudden fluctuations in prices.In a market estimated to be worth tens of billions annually, these regulations affect price stability, improve the investment environment, and enhance confidence in the real estate sector.
But what is the impact of the notice period on supply and demand? The regulatory decision of the 365-day notice period aims to strike an economic balance between supply and demand in the rental market, through several mechanisms, including controlling demand as tenants have enough time to plan to move or look for alternatives, reducing sudden demand for units at the end of contracts and alleviating momentary price pressures. Improving supply as owners and landlords get a full year to manage their residential units, whether to re-lease, develop, or sell them, which promotes better planning of the housing supply. This step also reduces price fluctuations
The existence of the notice period also reduces the cases of sudden price hikes at the end of contracts, contributing to a relative stability in rental prices in major cities.
Slowdown in the rate of price increase: From 10% per year in some cities to around 3-5% per year thanks to regulation and contract stabilization.
Market stabilization in major cities: With a long notice period, sudden price spikes are less likely.
Continued pressure in Riyadh: The city will remain under the influence of high demand as a result of its economic expansion and its attraction of companies and labor.
If we try to study the market outlook to 2030, we will find that with continued population growth and high demand for residential units, the size of the residential rental market in Saudi Arabia is expected to reach about 100 billion riyals annually by 2030, a significant increase from the current market size of about 40-50 billion riyals.
The market will remain vulnerable to demand pressures in major cities, but new regulations, including the one-year notice period, will calm the market and create relative price stability, with new housing projects under the national housing programs expected to contribute to meeting part of the growing demand.
With the market expected to reach SAR 100 billion annually by 2030, the main challenge remains to increase the housing supply at a rate commensurate with population growth and increasing demand to ensure a sustainable and stable real estate market.
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