Saudi Real Estate Inflation Slows to 1.3% in Q3 as Residential Market Weakens

Saudi Arabia’s real estate inflation eased sharply in the third quarter of 2025, rising 1.3 percent year-on-year compared to 3.2 percent in the previous quarter, as cooling in the residential market offset continued strength in the commercial sector, according to official data released by the General Authority for Statistics (GASTAT).

The Kingdom’s Real Estate Price Index climbed to 103.9 in Q3, up from 102.6 a year earlier, but the pace of growth has slowed significantly amid government measures to stabilize housing costs. GASTAT reported that the sector’s quarterly performance also slipped by 1.1 percent compared to the previous quarter, largely due to falling residential prices.

The residential sector, which carries the greatest weight in the index, recorded a 0.9 percent year-on-year decline, led by a 1.7 percent drop in apartment prices. Prices for villas fell 2.5 percent quarter-on-quarter, while residential land values slipped 0.8 percent.

The slowdown follows recent regulatory measures aimed at addressing affordability challenges in the housing market, particularly in Riyadh. In September, the Saudi Cabinet approved new rent control measures, including a five-year freeze on rent increases for both residential and commercial properties within the capital’s urban limits. The decision, effective September 25, builds on earlier reforms introduced in April that increased the White Land Tax rate on undeveloped plots from 2.5 percent to up to 10 percent, as part of efforts to boost land utilization and curb speculation.

Despite residential price declines, the commercial sector continued to show strong performance. Prices in the segment surged 6.8 percent year-on-year, supported by a 7.2 percent rise in commercial land values. The demand for office and retail space remains robust, particularly in Riyadh and Jeddah, where corporate expansion and new business registrations have accelerated under the government’s Vision 2030 diversification strategy.

“The commercial sector, which accounts for 25.4 percent of the index, recorded a notable increase driven by commercial land, building, and showroom prices,” GASTAT said. It added that commercial building prices rose 3.3 percent, while showroom prices were up 1.1 percent compared with last year.

A recent report by JLL echoed these findings, noting that prime office rents in Riyadh climbed 7.3 percent year-on-year in the second quarter to SR3,630 ($967) per square meter due to tight supply and sustained demand from multinational firms establishing regional headquarters in the city.

Regionally, the Eastern Province recorded the strongest rise in property prices, up 6.1 percent, while Madinah saw the steepest decline at 8 percent. Riyadh’s growth rate moderated to 1 percent, down from 3.6 percent in the previous quarter.

Analysts say the government’s market stabilization measures, combined with ongoing economic diversification efforts and mega-projects, are likely to keep the real estate sector on a sustainable growth path. The Real Estate General Authority projects the market’s value to reach $101.6 billion by 2029, with an annual growth rate of 8 percent from 2024.