There are numerous factors that influence pricing of residential projects. Strategic location remains the primary driver of market value, while the dynamics of supply and demand, the availability of services, and the financial solvency of buyers all play decisive roles, in addition to the impact of project quality and bank financing ratios in shaping fair and sustainable pricing policies.
Mohammed Al-Jaeid: Location and Purchasing Power Determine the Pricing Equation
Mr. Mohammed bin Nayef Al-Juaid, a member of the Real Estate Committee at the Riyadh Chamber of Commerce, emphasized that «location» remains the most challenging factor and the primary determinant in evaluating any real estate project worldwide. In an analytical overview of pricing policies, Al-Jaeid explained that a property’s true value is not solely linked to its size or view, but rather to the vibrancy of its location and the purchasing power of the surrounding area.
The Philosophy of Location and the Psychology of Demand
Al-Jaeid believes that global price disparities prove that location is the primary driver; We may find coastal properties in certain countries at very low prices, while small plots in industrial or densely populated, vibrant areas can reach millions of dollars. He noted that the golden rule governing the market is «the balance between supply and demand»; the greater the momentum in a particular area, the higher its market value automatically rises, supported by the surrounding amenities and logistical services.
Pricing Discrepancies Among Companies
Regarding pricing mechanisms, Al-Jaeid revealed a gap in methodology between companies; small firms often rely on «emulating the local market» and the immediate environment of sellers and developers. In contrast, large companies adopt a policy of «scientific foresight,» where the pricing process begins with in-depth feasibility studies, analysis of local and global market forecasts, and reliance on precise indicators to measure value before units are launched, which lends their pricing greater credibility and stability.
Major Projects and Foreign Ownership: Drivers of Growth
Al-Jaeid praised the wise decisions that ensure the stability of the Saudi market, emphasizing that in a country undertaking high-quality, large-scale projects (such as those under the Vision initiative), it is natural for the real estate sector to experience a boom that is reflected in buyer demand and investor appetite. He also noted that decisions to allow foreign ownership serve as additional fuel that boosts demand, contributing to a «slight and gradual» rise in prices that supports the market’s vitality and sustainability.
Yahya Al-Qahtani: The real estate market is suffering from price gaps
Yahya Al-Qahtani, a real estate broker, shared his perspective on the current state of the housing market, noting that there is a real gap between prevailing price levels and the financial capacity of broad segments of the population.
The Income Gap and the Challenge of Homeownership
Al-Qahtani emphasized that a large proportion of middle-income earners continue to face severe difficulties in acquiring suitable housing, noting that current prices are completely out of line with this group’s financial capacity, Al-Qahtani cited a real-life example: an employee earning a salary of around 13,000 riyals finds himself unable to purchase a villa valued between 900,000 and one million riyals, emphasizing that the discussion here focuses on «villas» as the primary option for large families for whom apartments or small duplexes are unsuitable, in order to ensure a dignified and stable life.
«Real Estate Balance» and Financing Pressures
Al-Qahtani added that the real estate sector is looking for reasonable prices that meet the targets of the «Real Estate Balance Platform» and align with the wise leadership’s directives to make housing affordable for everyone. He also emphasized that the current rise in bank interest rates has posed an additional obstacle, leading to a noticeable decline in the purchasing power of many prospective homebuyers due to financial pressures and high monthly payments that strain household budgets.
The Need to Correct the Price Trend
In the same context, Al-Qahatani noted that the market is moving toward the correction we hope for, one that specifically serves the middle-income segment, pointing out that large families need independent living spaces (villas) at affordable and attractive prices. He concluded by saying that current trends from the relevant authorities are cause for optimism, as the proposed solutions address the core of the problem: striking a balance between the quality of housing and citizens" ability to afford it without compromising their quality of life.
Ahmed Al-Saegh: Added Value Determines Price Trends
For his part, Ahmed Al-Saegh, a real estate project manager, explained that pricing for residential projects no longer depends on a single factor as it did in the past, but rather is the result of a balanced equation that combines the actual cost, the added value provided by the project, and the purchasing power of the target demographic, with the weight of each factor varying depending on the location and nature of the project. Al-Saegh points out that total cost remains the foundation of the pricing process, especially given the continuous rise in construction material prices and the increasing value of land both within and outside cities. He emphasized that this cost sets a minimum threshold that developers cannot fall below without compromising construction quality or building standards.
Buyers Seek a Comprehensive Lifestyle
Conversely, the amenities and services surrounding a project have become a decisive factor in determining the price, particularly for projects located within cities or near schools, hospitals, and business centers. Al-Saegh emphasizes that today’s buyers are no longer looking for just a residential unit, but rather a comprehensive lifestyle, which gives developers greater flexibility in pricing when there is genuine added value. As for purchasing power, its importance is even more evident in sub-regions, where developers are keen to align the design of the residential product with residents" purchasing power before setting the final price, to ensure market acceptance and sustainable demand.
The "Wafi" Program Reduced Capital Requirements
Regarding the differences in pricing policies between large and small projects, Al-Saegh explains that large developers operate under a long-term development model based on creating integrated communities, and rely heavily on off-plan sales through regulatory frameworks such as the "Wafi" program, which reduces the need for massive capital in the early stages and lowers financing risks. In contrast, small developers bear the full cost of land acquisition and construction financing, which increases their risk exposure and often results in higher residential unit prices compared to some major projects.
Regarding future outlook, Ahmed Al-Saegh expects the real estate market to see relative price stability over the next two years as a result of market equilibrium, with large-scale projects—which are able to offer more competitive prices—gaining a relative advantage, while smaller projects face greater challenges. He emphasizes that the market is moving toward a more mature phase, with increasing reliance on regulatory programs such as “Wafi” for sales and rentals, thereby enhancing market stability and boosting confidence among investors and buyers alike.
