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Sunday, Aug 24, 2025

Why Saudi developers might need to change focus to meet real estate demand

Why Saudi developers might need to change focus to meet real estate demand

Experts say affordability is key as Saudis struggle to finance the large villas most common in the kingdom
Affordability is likely to become more important in the real estate market to Saudis as most struggle to buy the large villas most common in the kingdom.

Experts say despite shifts in demographics, a reduction in household sizes and on-going cultural reform, there has been very little change in the nature of housing supply across the kingdom.

The majority of new stock is centred towards large villas on the periphery of the ever-expanding urban boundaries of Saudi Arabia’s major cities.

But this type of product is one which the new demographic cohort will struggle to afford or have any desire to occupy, according to real estate consultants Knight Frank which said demand for properties below SR1 million is highest.

It added that affordability, which is often used as a precursor for estimating effective demand, is often looked at as a singular quantitative matter in Saudi Arabia.

To bridge the gap in this understanding, Knight Frank has undertaken its inaugural Saudi Arabia National Housing Survey which aims to strengthen understanding of effective demand on a national and city level across the kingdom.

Taimur Khan, associate partner and head of research, Knight Frank Middle East said: “Saudi Arabia has seen rapid changes in its, where its population has increased by over 520 percent in the 50 years to 2020 and where over the same period its rate of urbanisation has increased from 49 percent to 84 percent.

In addition to this, the demographic profile has also changed, where today an estimated 58 percent of its citizen population is below the age of 30.

"Despite these shifts, we have seen very little change in the nature of housing supply. This backdrop has meant that affordability has become one of the most prevalent challenges facing the Saudi Arabian housing sector and our survey provides potential solutions to tackle these challenges.”

The survey showed that 56 percent of those renting said they were looking to buy a property in the next five years.

It also highlighted that demand for properties below SR1 million is highest.

Knight Frank said it estimates that at least a third of the market still retain a preference for apartment living.

The survey said over 62 percent of potential buyers surveyed would be likely or very likely to purchase an off-plan property.

Using the data from the survey, Knight Frank said it is able to identify critical factors which must be met to capture the majority of demand.

Stefan Burch, partner and general manager, Knight Frank Saudi Arabia said: “We are fully aware of the pent up demand for suitable residential stock within the kingdom. To date the challenge has been understanding exactly where the parameters of demand lie.

Having commission this extensive survey we have been able to observe the type and price of residential stock that will respond to the majority of existing demand which will, in turn, assist stakeholders when considering participation in the residential sector."
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