Saudi Arabia Housing Affordability Analysis
Housing affordability sits at the intersection of Saudi Arabia’s most consequential policy objectives: achieving 70% homeownership by 2030, absorbing a youth demographic where 63% of nationals are under 30, and managing a price recovery that has added 26.7% to values since 2021. The mid-market segment — apartments priced USD 133,000-400,000 (SAR 500,000-1.5 million) — represents 72% of unmet housing demand, according to Mordor Intelligence and Deloitte analysis. With total real estate loans reaching SAR 951.3 billion and the homeownership rate at 65.4% (up from 47% in 2016), the Kingdom has made historic progress — but the remaining 4.6 percentage points to the 70% target require addressing affordability constraints that differ sharply by city, property type, and income bracket.
The Affordability Equation
Affordability in Saudi Arabia must be assessed at the city level, as pricing varies dramatically across markets. The gap between the most and least expensive major cities spans a factor of ten or more, creating radically different homeownership prospects for equivalent income levels.
In Riyadh, a typical 120-square-metre apartment in general areas costs approximately SAR 596,000-624,000 (at SAR 4,971-5,200/sqm). In prime districts, the same unit ranges from SAR 792,000 to SAR 1.8 million, while KAFD apartments at SAR 7,500-10,000/sqm push 120-sqm units to SAR 900,000-1.2 million. For a young Saudi household earning the national median income, the general-area apartment represents approximately 8-10 times annual income — stretching but achievable with mortgage support. The Diplomatic Quarter at SAR 12,000-18,000/sqm and Al Olaya at SAR 10,000-15,000/sqm are entirely beyond mass-market affordability, with penthouses averaging SAR 10 million.
Riyadh’s 10.6% year-on-year price growth in 2025 — the strongest nationally — actively erodes affordability. Apartment prices are expected to rise a further 4-7% and villa prices 3-6%, meaning buyers who delay face a progressively more expensive market. The north-south price divide compounds the challenge: An Narjis and Al Sahafah at SAR 11,000/sqm are nearly triple southern districts like Al Shifa, creating geographic affordability tiers within the same city.
In the Dammam Metropolitan Area, affordability is substantially better. Entry-level villas at SAR 1,080 per square metre — the lowest among major cities — and apartments at SAR 2,500-5,000 per square metre place homeownership within reach for a broader demographic. A 120-square-metre apartment at SAR 300,000-600,000 represents a more manageable 4-7 times median income. The DMA’s 8.41% projected CAGR suggests prices will rise, but from a base that remains accessible relative to Riyadh and Jeddah.
Jeddah occupies the middle ground. Apartment prices averaging SAR 4,200-4,500/sqm (up 1.6% YoY) and villa prices at SAR 5,000-5,707/sqm (up 3.1%) place the port city between Riyadh’s premium and the Eastern Province’s value positioning. Budget areas like Al Fayha’a offer apartments from SAR 3,750/sqm — a 120-sqm unit at SAR 450,000 is achievable for dual-income households with REDF support. Luxury districts Al-Shati and Al-Hamra at SAR 8,000-14,000/sqm remain premium territory.
Makkah and Madinah present distinct affordability profiles shaped by spiritual significance premiums. Makkah apartments near the Haram exceed SAR 10,000 per square metre, placing central locations beyond mass-market affordability, while outer districts remain accessible at the citywide average of SAR 3,650/sqm. Makkah’s H1 2025 transaction pattern — 33% decline in total value alongside 11% increase in deal count — confirms a market-driven shift toward affordable units. Madinah apartments averaging SAR 3,835/sqm with units starting from SAR 320,000 in outer districts offer better accessibility, though prime areas near the Prophet’s Mosque exceed SAR 950,000.
The Mid-Market Gap
The 72% figure for mid-market unmet demand highlights a structural misalignment between developer output and buyer demographics. Many developers — particularly in the luxury segment — focus on premium projects with higher margins. The Saudi luxury real estate market reached USD 15.1 billion in 2024, projected to grow to USD 25.7 billion by 2033, with branded residences from Ritz-Carlton, Aman, Armani, and Raffles commanding ultra-premium prices. The giga-projects by nature target upscale demographics — Diriyah Gate’s branded residences, New Murabba’s 104,000+ units within a premium master plan, and Qiddiya’s entertainment-oriented communities.
This leaves the mid-market dependent on GRE-led supply from ROSHN and NHC, which are scaling rapidly but have not yet closed the gap. ROSHN’s 155,000-home target with a USD 47 billion budget implies approximately SAR 1.14 million per home all-in — viable at current pricing but positioned above true entry-level. NHC’s pipeline exceeding USD 50 billion across 39 projects in 17 cities, with 150,000 units delivered and 600,000 targeted by 2030, provides the broadest affordable housing platform.
NHC’s Khuzam district launch in November 2024, with entry prices starting at SAR 250,000 (USD 66,700), represents a direct response to the mid-market deficit. This price point — the most affordable from a major developer in Riyadh — demonstrates that affordable delivery at scale is achievable with government land subsidies and efficient construction. The agreement with China State Construction Engineering Corporation (CSCEC) for 20,000 housing units signals the scale of international construction partnerships needed to address the gap.
The new-build premium adds to the affordability challenge. New-build homes carry a 12% premium per square metre compared to existing properties, meaning buyers seeking modern stock pay significantly more than those willing to accept older inventory. This premium, while justified by superior energy efficiency, building code compliance, and finishes, effectively prices the newest supply above the affordability threshold for many mid-market buyers.
Construction Cost Pressure on Affordability
Construction costs have increased 30-50% cumulatively since 2020, directly constraining affordable housing delivery. When construction costs reach SAR 3,000-4,000/sqm and land costs add SAR 2,000-5,000/sqm in Riyadh, the all-in development cost of a standard 120-sqm apartment reaches SAR 600,000-1,080,000 before developer margin. This cost floor makes NHC’s SAR 250,000 entry pricing impossible without government subsidies — the government effectively subsidises land and infrastructure to bridge the gap.
Building materials inflation of 15-30% between 2022 and 2025, combined with labour market wage increases of 30-50% for skilled construction workers, creates persistent upward pressure on the construction cost floor. Technology adoption — 3D printing, prefabrication, modular construction — offers potential relief, but has not yet achieved scale sufficient to materially reduce costs.
Mortgage Accessibility
The expansion of mortgage credit has been the single most impactful affordability intervention. Total real estate loans reached SAR 951.3 billion by year-end 2025, with mortgage penetration reaching approximately 20% of GDP, up from 3% in 2010. REDF financing grew 16.4% to USD 16.7 billion in 2024, directly subsidising mortgage costs for eligible Saudi nationals.
Key accessibility measures include the lowering of the minimum age for housing support from 25 to 20 years (May 2025), enabling younger citizens to enter the market earlier. The 28.3% annual increase in new mortgage loans through February 2025, driven by apartment lending, confirms that mortgage-supported demand is actively converting to transactions. Housing finance for individuals reached USD 12.8 billion in H1 2025, up 15% from H1 2024.
The August 2025 approval of Saudi Arabia’s first RMBS transactions by SAMA introduces a secondary market mechanism that should ultimately increase mortgage liquidity and potentially reduce borrowing costs. With sector-wide bank capital adequacy around 19% and real estate loans comprising 30% of total bank portfolios, the banking system has capacity for continued expansion — but RMBS diversifies funding sources beyond bank balance sheets.
Government Subsidy Programmes
The Sakani programme is the primary government housing subsidy vehicle. In H1 2025, 54,000+ families benefited, following 117,000+ in 2024 and cumulative beneficiaries exceeding 1.2 million since launch. Sakani provides a combination of subsidised land, subsidised loans, and ready-made housing solutions targeting the affordability-constrained demographic.
REDF (Real Estate Development Fund) provides below-market-rate financing that effectively reduces the cost of homeownership for eligible Saudis. The 16.4% increase in REDF financing to USD 16.7 billion in 2024 reflects programme expansion aligned with the 70% homeownership target. The cumulative impact of Sakani and REDF is visible in the homeownership trajectory: 47% (2016) to 63.7% (2023) to 65.4% (2024) — approximately 1.5-2 percentage points per year.
The 5% Real Estate Transaction Tax (RETT) represents the largest predictable cost on top of purchase price — at SAR 250,000 entry pricing, this adds SAR 12,500, and at SAR 600,000 mid-market pricing, SAR 30,000. While modest in absolute terms, RETT adds to the total capital required for purchase, affecting affordability at the margin.
Regional Affordability Comparison
Comparing affordability across Saudi Arabia’s major markets reveals stark differences that shape buyer migration patterns and developer strategy:
Riyadh: Most expensive. Standard 120-sqm apartment: SAR 596,000-624,000. Price-to-income ratio: 8-10x. Apartment prices rising 4-7% annually, compressing affordability further. The five-year rent freeze at September 2025 levels may reduce ownership urgency for renters paying below-market frozen rents.
Jeddah: Moderate. Standard 120-sqm apartment: SAR 504,000-540,000. More stable pricing (apartments +1.6% YoY) creates less affordability erosion. Budget areas like Al Fayha’a from SAR 3,750/sqm offer accessible entry points.
DMA: Most affordable. Standard 120-sqm apartment: SAR 300,000-600,000. Entry-level villas at SAR 1,080/sqm — nearly five times cheaper than equivalent Riyadh. The 58.5% transaction volume surge in Q3 2025 suggests affordability-driven demand migration from higher-cost markets.
Makkah: Bifurcated. Outer districts accessible at SAR 3,650/sqm average, but Haram proximity pushes beyond SAR 10,000/sqm. The H1 2025 deal count increase (+11%) alongside value decline (-33%) confirms buyer shift toward affordable tiers.
Madinah: Accessible. Apartments from SAR 320,000 in outer districts. The 49% transaction value surge suggests strong fundamental demand at current affordable pricing levels.
This geographic affordability gradient drives internal migration patterns, with price-sensitive buyers choosing DMA or Madinah over Riyadh when employment flexibility permits. The expanding remote work culture accelerated by Vision 2030’s digital economy initiatives may amplify this migration trend.
Affordability Outlook
The affordability trajectory depends on the race between supply delivery and price growth. If the 105,000-unit pipeline for 2026-2027 materialises on schedule, it could moderate price growth in entry-level and mid-market segments. However, if demand drivers — particularly the under-30 demographic and RHQ programme with 600+ companies — continue at current intensity, affordability may remain stretched in high-demand markets like Riyadh.
The five-year rent freeze adds an important dimension: by capping rental costs at September 2025 levels, it may reduce urgency among renters to purchase, potentially moderating ownership demand and providing breathing room for affordability to stabilise. Conversely, it may redirect renter savings toward purchase deposits, accelerating the rent-to-own transition.
The foreign ownership law effective January 2026 introduces a new variable. If international buyers concentrate in designated zones, the demand impact on those specific markets could accelerate price growth beyond domestic affordability thresholds. However, foreign ownership caps of 70-90% and the white land tax provide regulatory guardrails against speculative excess.
RETT and Transaction Cost Impact on Affordability
The 5% Real Estate Transaction Tax applies to all property transfers, adding a significant layer to affordability calculations. For a SAR 600,000 mid-market apartment, RETT adds SAR 30,000 to the acquisition cost. Combined with mortgage origination fees, legal costs, and potential agency fees, total transaction costs can reach 7-8% of purchase price — a meaningful barrier for first-time buyers.
For buyers accessing REDF-subsidised financing, some transaction costs may be absorbed within the subsidy structure. However, for market-rate purchasers and foreign buyers entering under the new ownership law (with transfer fees capped at 5% for non-Saudi sales), transaction costs compound the affordability challenge. The total cost of entry — deposit requirement (10-30% of value), RETT (5%), and ancillary fees (2-3%) — means a buyer of a SAR 600,000 apartment needs SAR 102,000-228,000 in upfront capital before the first mortgage payment.
These transaction costs disproportionately affect lower-income buyers, for whom the upfront capital requirement represents years of savings. Government programmes that subsidise or absorb transaction costs for Sakani beneficiaries partially address this barrier, but market-rate buyers face the full cost burden.
For city-level pricing, mortgage data, transaction volumes, or investment analysis, explore our dedicated sections. For comparisons between buying and renting, see our comparison analysis. Contact info@saudiarabiahouses.com for affordability research.