Saudi Arabia's real estate sector has witnessed unprecedented growth, driven by a surge in mortgage lending, according to data from the Saudi Central Bank (SAMA).

Mortgage lending by finance companies reached an all-time high of 28 billion Saudi Riyals ($7.4 billion) at the end of the third quarter of 2024. This represents a substantial increase, with companies accounting for 5 billion riyals and individuals for approximately 23 billion riyals.

Furthermore, finance companies in the Kingdom recorded their highest net profit since 2022 in the third quarter, reaching 768 million riyals ($204.5 million).

Commercial banks also reported a significant increase in mortgage lending, both to individuals and companies, at a rate of 13% year-on-year, reaching 846.48 billion riyals ($225 billion) at the end of the third quarter, compared to 747 billion riyals ($199 billion) in the same period of 2023.

Individual mortgage lending from commercial banks accounted for approximately 77.6% of the total, valued at 657 billion riyals, representing an 11% year-on-year increase. Meanwhile, corporate lending accounted for 22.4% of the total, with a growth rate of 22%.

Record Growth

Mohammed Al-Faraj, Senior Asset Management Executive at Arbah Capital, told Al-Sharq Al-Awsat, "The Saudi real estate market is experiencing unprecedented momentum, driven by a significant increase in mortgage lending to individuals by finance companies. Last year witnessed record growth in this type of lending."

Al-Faraj expects this upward trend in the mortgage market to continue in 2025, with a projected growth rate of 12%, supported by factors such as interest rate cuts, accelerated economic growth, increased purchasing power, growing consumer confidence, successful government policies to support the housing sector, diversification of real estate products, and rising demand for housing.

He further suggested that this growth will contribute to stimulating economic activity and increasing demand for various goods and services.

It is worth noting that the US Federal Reserve reduced interest rates three consecutive times between September and December 2024 by approximately 100 basis points, bringing them to a level between 4.25% and 4.5%.

Mortgage Market

Saudi Arabia places significant emphasis on the mortgage market to enhance liquidity in the real estate finance sector. Several agreements and memoranda of understanding have been signed to develop and strengthen this vital sector.

The Saudi Real Estate Refinance Company (SRC), fully owned by the Public Investment Fund, recently signed a memorandum of understanding with Hisana Investment Company to develop this type of market and attract local and international investors in the secondary real estate market.

SRC also signed a memorandum of understanding with the US-based BlackRock to develop real estate financing programs in the Kingdom and enhance institutional participation in capital markets.

In November, SRC signed a memorandum of understanding with King Street, a capital management company, to activate initiatives that contribute to establishing a sustainable real estate mortgage refinancing system.

These agreements aim to expand markets through local and international channels, diversify funding sources through fixed-income markets, enhance the stability of the real estate finance market, and contribute to achieving the goals of Vision 2030, particularly in the areas of housing and developing the financial sector.

Saudi Housing Minister Majid Al-Haqil predicted in November that the value of the real estate market would reach approximately 1.3 trillion riyals ($346 billion) by 2030. He also mentioned that SRC achieved a refinancing volume of over 37 billion riyals ($9.8 billion) in portfolios.