New Saudi reforms will make housing affordable in Riyadh
Saudi moves to ease entry of younger citizens to enter the Riyadh property market
Dubai: Saudi Arabia’s plans to bring stability to land values and residential rental rates in Riyadh could not have come at a better time, with property buyers hoping this will have a more or less immediate effect in cooling down the market.
Industry sources say the Saudi move represent the biggest set of reforms since 2016, which was when it introduced a 2.5% annual tax on owners of vacant land. This move at the time eventually allowed more land to be freed up for rapid development.
But it set the stage for property prices and rents to push higher on ever increasing demand from a growing base of Saudi buyers, many of whom were buying their first homes.
According to forecasts, Riyadh city’s population would rise from 2022’s 7 million to around 9.6 million by the end of this decade. And between 2024 and 2034, demand for additional housing from Saudi nationals is estimated to be around 305,000 units, according to a recent report by the consultancy Knight Frank.
What the new Riyadh reforms aim to do
According to the authorities, the latest reforms on land and rents will show up as:
Riyadh City offering anywhere between 10,000 to 40,000 plots for residential purposes over the next 5 years. (These plots are to meant for ‘eligible’ Saudi citizens and at values not over SR1,500 per square meters, according to Saudi reports.)
Restrictions have also been removed on transactions involving land in two major areas in the north of Riyadh.
The first area cover a substantial 17 square kilometers, while the second would cover 16.2 square kilometers. (These come on top of just over 48 square kilometers that were released earlier, according to Saudi media reports.)
Huge positive for first-time and young homebuyers
“What these Riyadh-specific reforms will do is ensure young Saudi nationals have a good shot at buying homes, whether for their own use or as investments,” said an official with a real estate consultancy. “There’s huge pent up demand for housing in Riyadh and Saudi Arabia, made more so the opening up of freehold rights to non-nationals.
“New projects such as the Trump Tower are being launched in the Kingdom, but on a parallel track, there has to be sufficient availability of slightly subsidized housing options for Saudi nationals.
“The Riyadh reforms make it happen.”
According to estimates, apartment prices rose between 8%-15% on average in major cities depending on location, developer and project credentials. This is a trend that's been quite obvious since 2021, and was set off by a perfect storm of ever increasing demand getting a boost from government mandated land and property reforms.
But the rise was pricing many out of the market, which would have slowed growth and meant genuine end-users didn't have a proper shot at homeownership.
Specific to Riyadh, the city was expanding through the creation of a downtown in the form of 'New Murabba', located to the northwest of the city.
This is where the latest land release plans would have a major part to play. "With two large areas in northern Riyadh being released for development at set price ranges, it leaves developers the room to create fairly affordable homes," said a consultant.
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