Housing demand is on the rise in Saudi Arabia thanks to NEOM

The property market in Saudi Arabia is booming.

The appeal of the Saudi kingdom has been boosted in recent years thanks to the NEOM megaproject, located in north-west Saudi Arabia and comprising various areas of activity such as The Line, Oxagon, Trojena, Magna and Sindala. 

It is a new megacity and technology zone that seeks to further develop the industrial, technological and economic fabric of the Saudi kingdom in areas other than the oil sector. This enclave is part of the Vision 2030 initiative, promoted by the crown prince, Mohamed bin Salman bin Abdulaziz Al-Saud, who for years has been seeking to diversify the country's productive and economic activity so as not to depend on hydrocarbons, the Saudi kingdom's main source of funding.

With NEOM, in addition to seeking an economic alternative to oil and gas, the aim is to rival other developed areas in the Gulf region such as Dubai and Abu Dhabi in the United Arab Emirates, or Doha in Qatar, and to shift the focus of attention from the Gulf to the Red Sea.

The NEOM project was presented by Prince Mohamed bin Salman in 2017 and it was detailed that it has an investment of 500 billion dollars, within the Vision 2030 programme.

NEOM covers an area of 26,500 square kilometres and special economic and technological activity is planned for the area, making it very attractive to economic agents and investors, both Saudi and from all over the world, who will seek to set up in this appealing enclave in the northwest of Saudi territory. The complex will have dozens of tourist resorts and 120 kilometres of coastline, among other facilities.

This boost is leading to increasing interest in settling in Saudi territory and this is obviously heating up the property market. 

The housing need in Saudi Arabia is expected to require the construction of 115,000 homes every year for the next six years to meet the demand for property in the nation.

This marked growth in the housing sector will lead to a rise in property prices in the face of high demand, which is being caused by the fact that up to 115,000 homes need to be built every year for more than five years.

As the real estate agency Knight Frank also reported, private consumers are expected to spend up to 1.22 billion dollars in the property market by 2025.

In addition to the boost provided by NEOM, the Saudi state has also given a boost to the housing market, which is another sector that has been included in the diversification of the Saudi economy, promoting sectors of the national productive and economic fabric other than oil so as not to depend on this source of income, which has been the main one for the Saudi kingdom in recent decades. The Saudi government has invested billions of dollars in the sector through the Public Investment Fund. This investment also includes NEOM, a major urban and industrial development centre of spectacular dimensions. 

The NEOM area is expected to house up to 9 million people in what is a key initiative within Saudi Arabia's Vision 2030 programme of economic diversification, and this will have an impact on the housing market.

The property market is booming in Saudi Arabia and, according to a recent survey of more than 1,000 households, including 100 expats living in the kingdom, there are plans to spend nearly 500 million dollars on property and another 730 million dollars on projects.

Despite the estimate of 115,000 homes per year for the next six years, it is noted that the market does not have enough supply to absorb so much demand. 

On the other hand, the Saudi state aims to increase the rate of home ownership among its inhabitants to 70%, when it currently stands at just over 63%.

It is worth noting that the price of housing is experiencing a significant rise given the great buyer interest that now exists in relation to the Saudi market, a voracious appetite for buying that has caused the year-on-year house price index (comparing the same period of time from one year to the next) in the Gulf country to increase by 3.6% in the fourth quarter of 2024, which is an all-time high for this benchmark value. The all-time low was seen in the first quarter of 2017 with a fall of 9.50%.