Saudi Arabia needs 115,000 new homes each year

More than 115,000 new homes are needed each year up to 2030 to satisfy demand from Saudi nationals, research showed on Monday.

According to global property consultancy, Knight Frank’s new whitepaper: Transforming Saudi’s Residential Housing Market: Opportunities Abound, approximately one-third of this incremental demand is being driven by the government’s 70 per cent homeownership rate target, given the rate of homeownership rate stood at 63.7 per cent at the end of 2023.

The larger driver of projected housing demand, approximately two-thirds, is due to household formation, as young Saudis, whether single or married, opt to move into their own home, the paper said.

Dr Christopher Payne, partner – chief economist, Mena, said: “Housing demand is a function of Saudi Arabia’s young population. Around 45 per cent of Saudi nationals are under 20 years old and 63 per cent are under 30 years old. Over the coming years, these young Saudis will want, quite naturally, to live in and own their own homes.”

Knight Frank’s conservative estimate of housing demand between 2024-2030 stands at 825,000 units. As of the end of 2023, the Ministry of Municipal and Rural Affairs (MOMAH) reported that there were 883,562 applicants to their Sakani program, which is focused on the giving Saudis access to home ownership, and the financial wherewithal, to afford their own homes.

The kingdom’s housing programme was created in 2018 to overhaul the governance, delivery, and financial provision of the residential housing market. One of the programme’s key initiatives is the Sakani programme. Since its establishment, over 800,000 contracts have been signed, of which 415,000 were for ready-made homes, 201,000 were for self-construction projects, 90,000 were for off-plan products and 94,000 were for MOMAH land products.

One key marker for the success of the housing programme and its numerous initiatives has been the incredible growth of mortgage finance, which has expanded from 121.9 billion Saudi riyals at the end of 2016 to 662.4 billion riyals at the end of Q2 2024, an over five-fold increase in under 8 years.

On the demand side, MOMAH has utilised on-line service platforms to streamline and speed up housing applications by Saudi nationals. At the same time, on the supply-side, the Etmam program has provided the industry with a one-stop online service centre for obtaining the necessary approvals and permits required for development.

Also addressing the supply-side, the National Housing Company, or NHC, has already announced developments within their new community masterplans that incorporate approximately 200,000 housing units. By end of 2025, this total is expected to reach 300,000 units.

Knight Frank is currently tracking 1.04 million new homes that are either under construction, or planned, and due to be delivered by 2030.

Amar Hussain, associate partner, Research, KSA, said: “For developers, both local and international, the size of the housing market in Saudi Arabia presents a tantalising opportunity to help deliver the government’s vision in what is arguably the most exciting new global real estate market.”

Saudi Arabia’s thriving residential real estate market reflects strong growth fundamentals and a largely youthful population of over 35 million people, S&P Global Ratings said. “We believe that Saudi Arabia’s economic indicators and population growth will remain strong, and that new household formation and declining interest rates will support the demand for residential mortgages “ said S&P Global Ratings credit analyst Sapna Jagtiani. “We expect that demand for residential real estate will remain high, particularly in Riyadh and Jeddah, thanks to robust population growth of 3.3 per cent on average over 2024-2027, driven by domestic migration and partly by expat inflows,” she added.