S&P expects demand for residential real estate in KSA to remain strong

S&P Global Ratings reported that Saudi Arabia's residential real estate market is booming, underpinned by strong growth fundamentals and a young demographic, with the population exceeding 35 million.

The agency forecasted continued demand for residential properties in Riyadh and Jeddah due to robust population growth, averaging 3.3% from 2024-2027, partly driven by expatriate inflows.

It expects 16,000 additional units in Riyadh and Jeddah in H2 2024. Internal migration to major urban centers is likely to sustain housing shortages, supporting strong demand and new housing units, aligning with Saudi Arabia’s homeownership goals.

The agency noted that household growth and interest rates will boost demand for residential mortgage financing. Lower rates could help banks raise funds more efficiently and offload mortgages faster, increasing lending capacity, with projected loan growth at 9% for 2024-2025.

Regulatory and visa policy changes may also enhance foreign direct investment in the sector.

Challenges persist, including high land, construction costs, material expenses, and competition for funding with other Vision 2030 projects. First-time issuers may face hurdles accessing the developing debt capital markets.