The question in the Riyadh real estate market is no longer limited to "How much does the property cost?", after some offers began to shift the competition to another, more sensitive area: What will the developer offer the buyer to make the purchase decision? With indications of a decline in the prices of some lands in Riyadh, some real estate companies have begun to resort to other tools to stimulate demand, including financing starting from 0%, bearing some fees, and offering exemptions and additional incentives, which reduces the actual cost of purchase without necessarily having to reduce the advertised price of the property.
These shifts do not necessarily mean that the market has entered a price war, but they reveal an important change in the negotiation equation; the developer is no longer just competing on price, specifications and location, but has become willing to bear part of the cost of the deal to make the purchase decision easier for the customer.
Financing instead of price reduction
When a developer provides financing starting from 0% or assumes part of the fees and costs associated with the purchase, the advertised price of the property may remain the same, but the cost of ownership for the buyer decreases.
This is where the importance of this strategy for developers becomes apparent; directly reducing the price may affect project evaluations and prevailing prices, while providing incentives and easy financing gives the buyer added value without necessarily changing the advertised price.
From this perspective, financing offers appear to be a way to maintain advertised prices, while simultaneously easing the financial burden on buyers and encouraging them to make a purchase decision.
What do these offers mean economically?
From an economic perspective, preferential financing and exemptions cannot be viewed as "free gifts," as the seller or developer bears a portion of the transaction cost to make the real estate product more attractive. This means that the developer is now more willing to make concessions elsewhere in the equation rather than directly lowering the price, whether by absorbing fees, offering financing on better terms, or adding incentives that reduce the final purchase cost for the customer.
The ultimate goal is to stimulate sales and maintain cash flow, especially if the decision to purchase becomes more difficult for a segment of customers.
From "price war" to "incentive war"
The current situation does not necessarily indicate the outbreak of a widespread price war in the Riyadh market, but it does reflect a shift in the nature of competition.
Previously, price was one of the most prominent elements of comparison between projects, while the current incentives open a new door to competition, as a developer can maintain his advertised price, but offer the buyer better financing, exemptions from some fees, or additional benefits.
Therefore, a property with the same price tag may become more attractive than another if the cost of entry, payment terms, and accompanying incentives are more favorable to the buyer.
Are the balances of power changing?
Perhaps the most important indicator in these transformations is the changing balance of power within the market.
When a developer starts thinking about how to reduce costs for the client, rather than simply listing the property at a fixed price, the buyer becomes more involved in the negotiation process. The question then shifts from "How much does the property cost?" to a more impactful question: "What will you offer me to make me buy from you?"
This shift may give buyers more room to compare and negotiate, especially with the multitude of options and the competition among developers to attract demand.
Has Riyadh begun to enter the "era of Jupiter"?
The answer still needs more indicators before it can be said that the market has actually entered the “buyer’s time” phase, but the trend of developers to offer easy financing, incentives and exemptions clearly indicates that attracting a buyer has become a higher priority.
The market does not necessarily need a price collapse for the rules of the game to change; sometimes the change begins with the details of the deal itself.
Between reducing the price of land on one hand, and providing financing starting from 0% and incentives that reduce the actual cost on the other hand, it seems that the Riyadh market is moving towards a stage where the ability to convince the buyer to purchase, rather than just determining the price of the property, becomes the most important factor in competition.
Perhaps this is the most significant shift: the battle is no longer just over the price of the property, but over the cost of owning it, the conditions for acquiring it, and the value the buyer gets for their money.
