Saudi law allowing foreign real estate ownership sparks price fears

Saudi Arabia's decision to allow foreign ownership of real estate in designated areas, set to take effect in January 2026, is reshaping the country's property landscape but not without fears of inflated house prices and affordability challenges for citizens.

While the reform is part of the kingdom's Vision 2030 strategy to diversify the economy and reduce dependence on oil, economists are warning that the influx of foreign capital could push prices further out of reach in major cities like Riyadh and Jeddah.

Real estate expert Ali Metwally, speaking from a consultancy firm in London, said housing deals in Saudi Arabia hit nearly $29 billion in the first quarter of 2025 alone, up 37 percent from the same period last year.

Apartment prices rose by 6.6 percent, and the average cost per square metre has climbed to 3,865 riyals (around $1,030).

Metwally highlighted that mortgage lending had surged, with loans reaching 846 billion riyals (around $226 billion), while some banks were offering up to 90 percent financing for first-time buyers - further fuelling demand.

"We're reaching the limits of local demand," Metwally said, "which is why Saudi Arabia is looking to foreign investors to sustain momentum."

Under the new policy, foreign buyers can obtain premium residency status by purchasing property worth at least 4 million riyals ($1.06 million). The residency offers long-term benefits, including permanent stay for families, freedom to work, and rights to own or lease property even in some special zones.

Already, more than 1,200 foreign investors have joined Saudi Arabia's premium residency programmes, and analysts expect that figure to rise sharply once the ownership law takes effect.

Private wealth funds from Europe and Asia are reportedly eyeing opportunities, drawn by the combination of political stability and favourable tax terms.

But as real estate interest grows, so do affordability issues. Since the Covid-19 pandemic, average housing prices in Riyadh have soared by 81 percent, leaving many Saudis priced out.

Metwally said the government should consider measures such as taxing unused land and expanding subsidised housing for low- and middle-income families.

Arab and Gulf investors are also increasingly drawn to the kingdom, which some now see as a compelling alternative to Dubai, given its size and emerging investment opportunities.

These regional investors could account for 15–20 percent of early transactions once the new rules take effect, Metwally estimates.

Meanwhile, expats living in Saudi Arabia are also expected to move from renting to owning, especially if ownership rules are made easier for residents already in the country.

The long-term economic outlook appears promising in terms of investment. Research by Al Rajhi Capital estimates foreign property ownership could attract $20–25 billion in direct investment by 2030 and grow the construction sector to $191 billion by 2029.

Still, experts stress the need for balanced growth. While inflows of capital could boost non-oil GDP and create new jobs, they also risk overheating the housing market.

"The challenge now is ensuring that Saudis aren’t priced out of their own cities," said economist Jassem Ajaka, who noted the importance of aligning investor incentives with broader housing access goals.

Ajaka said the move was in line with Vision 2030's goal of opening the economy to global partners. However, the real impact will depend on how effectively authorities regulate the market and ensure that expanded investment benefits both foreign backers and local residents.