The impact of economic and fiscal policies on the Saudi real estate market

Architect Dr. Hisham Al-Qasim

The real estate market in Saudi Arabia is one of the sectors most affected by economic and financial policies, where interest rates, mortgage financing, and banking policies play a direct role in the movement of supply and demand and the price level.

Real estate market in Saudi Arabia is one of the most affected by economic and financial policies.

Recent Indicators

<According to data from Saudi Central Bank (SAMA), existing mortgage loans as of Q1 2025 amounted to about 922.2 billion riyals, an annual increase of more than 15%. New residential loans granted to individuals from January to April 2025 recorded about 34.1 billion riyals, an increase of 24% compared to the same period in 2024. CBRE reports that in the first quarter of 2025, mortgage financing rose by 28.3%, while the residential real estate price index climbed by 5.1%, driven by increasing land and villa prices.

The role of interest rates and banking policies

<Rising interest rates increase the cost of borrowing and limit the ability of individuals to obtain new loans, putting pressure on demand. Conversely, low or stable interest rates encourage the expansion of real estate financing. Banks" conditions - such as down payment size and deduction rates - remain a strong influence in determining demand.

The impact of government policies

Support programs such as »Sakani" and subsidized financing helped mitigate the impact of rising interest rates and increased citizens" appetite for ownership, explaining the continued growth of loans despite economic pressures.

The impact of government policies.

Challenges

Despite growth, the challenge remains in ensuring affordability for the middle classes, especially with rising prices in major cities, and the increasing reliance on loans raises risks in the event of sudden changes in monetary policy or oil prices.

Risks in the event of sudden changes in monetary policy or oil prices.

Recommendations to improve the balance

• Stabilize interest rates or adopt temporary subsidy mechanisms for home loans when rates are high, to protect the consumer.
• Encourage alternative financing (real estate bonds, private partnerships, subsidized mortgage fund) to expand sources of financing away from relying solely on commercial banks.
• Provide targeted support programs for middle and low-income groups, such as reducing the down payment percentage or extending repayment periods.
• Monitor inflation, especially construction and material costs, as they significantly affect the final cost of real estate.
• Promote data transparency: Publish periodic indicators for real estate loans, average interest rates on real estate loans, average quality of real estate purchased (apartments/villas) by cities.

<The data confirms that the Saudi real estate market enjoys strong momentum driven by financing and supportive policies, but the sustainability of this growth requires balanced management of interest rates, adjusting financing conditions, and supporting the most vulnerable groups. Success lies in attracting investments and achieving balance while protecting the citizen's right to housing.

@ArchHesham