About a year after the start of the investigation into real estate balance in Riyadh, the most frequently asked question remains the simplest: Have prices gone up or down?It is a legitimate question, but in my view, it is no longer sufficient to understand what is happening in the Riyadh market. The Real Estate Balance initiative is not a single decision to lower prices, but rather a set of measures aimed at increasing supply, stimulating land use and development, and regulating the rental market—all with the goal of achieving a better balance between citizens" ability to access housing and homeownership and the continued economic viability of owners, developers, and investors.
But more important than simply tracking price movements is asking about the impact of these changes on market participants. Has it become easier to find suitable housing?
Lower prices do not necessarily mean easier homeownership
In my opinion, the success of real estate market balance should not be measured solely by rising or falling prices; as the true ability to own a home is linked to the price of the home, household income, the cost of financing, the size of the monthly payment, and the availability of the right product.
Property prices may fall, but if the cost of financing remains high relative to household income, access to housing will not necessarily become easier. Conversely, an increase in supply and stability in the rental market can provide families with broader options and greater capacity for financial planning.
From this perspective, halting the annual increase in rents within the urban area of Riyadh for a period of five years provides tenants with greater stability in their monthly obligations, even if this does not directly lead to a reduction in the cost of homeownership.
The Landlord: Yield Is More Important Than Historical Price
For the landlord, the challenge is not limited to the property’s value, as rental income increases are legally capped, while operating, maintenance, and financing costs are not necessarily fixed. This makes net yield and the optimal use of the asset more important than relying on a historical price the property reached in a previous cycle.
The question is no longer just: "What is the price of my property?" but rather: "What yield does it generate?« and »Is its current use optimal?« And can it be developed or made more efficient to generate a better return?
From Land Ownership to Value Creation
Here I see the most significant shift worth watching in the coming years. Balancing measures were not limited to providing land to citizens; they also included lifting the moratorium on large tracts of land, amending the vacant land fee system, regulating the rental market, and monitoring prices, as well as making available between 10,000 and 40,000 residential land plots annually over a five-year period, at a price not exceeding 1,500 riyals per square meter for eligible beneficiaries in accordance with approved regulations.
With increased supply, the development of market regulation tools, and incentives for the development of unused land, I believe we may be witnessing a gradual transformation in the very nature of real estate wealth creation.
In previous cycles, it was possible to realize significant value by purchasing land, holding onto it, and waiting for its value to rise. In the market of the future, however, value may be linked to a greater extent to what an investor can add to the land: developing it, optimizing its use, taking advantage of available density and zoning regulations, and producing residential units, commercial projects, or efficiently managed income-generating assets.
This does not mean the end of land investment; land will remain a strategic asset, especially in prime locations and for major development opportunities.
But the difference in the future may lie between those who merely own land and those who know what to do with it.
This is the transition I see—from "real estate trading" to "the real estate value industry.”
When will prices reach their true value?
I don’t believe there is a single date or figure for true value; Riyadh is not a homogeneous real estate market.
In the residential sector, value is linked to purchasing power, the cost of financing, and the type of housing that citizens need. In the investment sector, it is governed by returns and cash flows. As for land, its value is increasingly determined by its location, uses, density, development costs, and demand for the final product. Therefore, some products and locations may reach equilibrium before others.
One year is not enough to make a final judgment on measures, many of which will have effects lasting for years, but it was enough to signal the beginning of a change in the rules of the game.
The most mature market is not one in which all prices fall, nor is it one in which all properties rise indiscriminately; rather, it is one that rewards good assets, good locations, good development, and real returns.
Those who understand this shift early on will not merely ask: When will property prices rise or fall?
Rather, they will ask the more important question:
Where will true real estate value be created in the future Riyadh market?
Real Estate Consultant
