Al Rajhi Capital pinpoints impact of recent regulatory updates on Saudi real estate sector

Riyadh city

Al Rajhi Capital projected the latest developments in the Saudi real estate sector to positively impact on market performance in the medium to long term.

These changes are bound to curb speculative pricing and price gouging in certain areas of Riyadh, thereby strengthening purchasing power, according to the brokerage’s recent report.

The recent series of directives and amended regulations aim to enhance the balance between supply and demand in the Saudi real estate sector — particularly in Riyadh, which remains a key hub for the Kingdom’s economic diversification and continues to witness strong economic growth, it further stated.

Key drivers supporting real estate development in Riyadh include the growing population, the Regional Headquarters Program, the hosting of global high-profile events (such as Expo 2030 and the 2034 World Cup), and undertaking mega projects (including King Salman Park, Diriyah Gate, and the New Murabba Project), Al Rajhi Capital underlined.

It added that residential real estate prices in Riyadh are on the rise, compared to other Saudi cities such as Jeddah and Dammam.

The report noted that local real estate activity declined by 22% year-on-year and 41% quarter-on-quarter in Q2 2025, marking its lowest level over the past nine quarters.

This decline was mainly attributed to subdued demand as investors and individuals adopt a wait-and-see mode, seeking more clarity on the new regulations and their consequences, it pointed out.

Moreover, some investors holding large land plots are expected to cooperate with real estate funds to accelerate land development and avoid delay fees. Also, a possible interest rate cut this month bodes well for demand recovery.

According to the report, the main companies and sectors seen to leverage the recent reforms include real estate developers — which will play a central role. This is besides businesses operating in building materials, cement, and construction-related activities, in addition to banks, mortgage finance companies, and real estate development funds.

Going ahead, Al Rajhi Capital predicts a series of major shakeups to be undertaken in the Saudi real estate sector. This includes allowing foreign real estate ownership in areas designated by the Real Estate General Authority (REGA).

New regulations on vacant properties are also projected within a year of the new law's publication, with more addressing rent increase caps in the cards, the brokerage added.