Saudi Residential Mortgage Lending Surges 28% in February

Saudi Arabia’s banking sector saw a sharp rise in residential mortgage lending in February, with new loans issued to individuals reaching SR8.91 billion ($2.37 billion), marking a 28.33% annual increase, according to data from the Saudi Central Bank (SAMA).

The figures indicate a notable shift in housing preferences, as apartment loans recorded the highest growth, surging by 46.45% to SR2.9 billion. While houses continue to dominate the mortgage market with a 62.6% share, this represents a slight decline from 65.24% in February 2024, signaling a growing preference for apartment living.

Loans for houses saw a robust increase of 23.05%, reaching SR5.57 billion, whereas financing for land purchases remained relatively stagnant, rising by just 0.61% to SR436 million.

Vision 2030 and Housing Demand

The rise in mortgage lending aligns with Saudi Arabia’s Vision 2030 goal of increasing homeownership to 70%. Demand for housing is being fueled by Saudi citizens as well as a growing expatriate population. A March report by Knight Frank revealed that 72% of Saudis and expatriates aspire to own homes, with the figure climbing to 93% among high-income citizens earning over SR50,000 per month. Among expatriates, 77% expressed interest in purchasing property in the Kingdom.

However, affordability remains a challenge, particularly in major cities like Riyadh, where apartment prices have risen by 75% since 2019 and villa prices have increased by 40%.

Government Reforms to Boost Homeownership

To address rising property prices and improve accessibility to housing, Saudi authorities have introduced a series of regulatory and urban planning initiatives. In March, the Royal Commission for Riyadh City and the Council of Economic and Development Affairs launched measures to stabilize real estate prices and expand housing supply.

Key initiatives include lifting restrictions on land transactions and development in northern Riyadh, unlocking 81.5 square kilometers for residential and commercial projects. Finance Minister Mohammed Al-Jadaan stated that these efforts are expected to curb price volatility, with newly released plots capped at SR1,500 per square meter and made available to Saudi citizens over the age of 25.

Expanding Foreign Investment in Real Estate

As part of Vision 2030, Saudi Arabia has been implementing real estate reforms to attract foreign investment, particularly in tourism, housing, and special economic zones. In 2024, officials confirmed plans to expand foreign ownership rights in strategic projects such as NEOM and the Red Sea developments.

Currently, foreign investors can own residential property in designated areas and obtain 99-year leases, according to the Real Estate Saudi platform. However, residential mortgage financing remains predominantly accessible to Saudi nationals through programs like Sakani and Dhamanat.

For commercial real estate, foreign ownership is subject to specific regulations, requiring approval from the Ministry of Investment. Investors looking to buy, sell, or lease properties for profit must meet a minimum investment threshold of SR30 million and commit to property development within five years, per guidelines outlined by the Saudi Embassy in the US.

These measures aim to align foreign investments with Saudi Arabia’s long-term economic objectives, ensuring sustainable growth in the real estate sector while meeting the housing demands of both nationals and expatriates.