A report issued by Jadwa Investment Company showed that the construction cost index in Saudi Arabia has continued to rise since March, recording a 2.6% increase in May—the highest since January 2024—a development the company attributed to the repercussions of the closure of the Strait of Hormuz and the resulting rise in transportation and shipping costs.

The report explained that the increase was primarily driven by rising prices in the lumber and carpentry and metal products sectors, while rebar prices, classified under metal products, rose by 3.9% in May, after recording an average decline of 1% during the first quarter of the year.
Jadwa Investment predicted that these pressures would gradually ease as shipping costs return to normal levels following the reopening of the Strait, though it may take some time for this to be reflected in the markets.

Conversely, the report noted a continued decline in the residential component of the Real Estate Prices index, which fell by 3.6% year-over-year during the first quarter of the year, marking its third consecutive quarterly decline following the drops recorded in the third and fourth quarters of 2025.

Increase in residential supply
The company attributed this decline to an expansion in the supply of residential units coinciding with a slowdown in demand, as a number of buyers tended to postpone purchase decisions while waiting for the market to stabilize following the measures taken last year to support the real estate sector’s balance.
Although the rise in construction costs may be reflected in housing prices in the future, the report predicted that this impact would remain limited, based on the continued decline in the housing price index and the expected significant increase in the supply of real estate.
Jadwa Investment also predicted that residential rents will continue to be influenced by the reforms underway in the sector, which will act as a downward pressure on inflation and partially limit the impact of rising prices on the other components of the Consumer Price Index.

The report emphasized that the slowdown in residential rent growth—as one of the largest components of the housing and utilities category— has played a key role in keeping inflation at low levels, with the pace of rent inflation expected to continue slowing in the coming period.