RIYADH: Saudi Arabia’s real estate sector underwent a major transformation in 2024, driven by the goals of Vision 2030. The market saw significant changes, fueled by unprecedented investments and key policy reforms. As a result, the Kingdom has positioned itself as a global leader in innovation, sustainability, and economic diversification within the real estate industry.

Vision 2030

Since its launch in 2016, Vision 2030 has served as Saudi Arabia’s roadmap for economic diversification, with real estate playing a central role. By 2024, the Kingdom had invested SR4.9 trillion ($1.3 trillion) in infrastructure, significantly boosting residential, commercial, and hospitality capacities. Notable projects aim to introduce over a million residential units, as well as expand retail and office spaces by 7 million sq. meters each.

“Saudi Arabia’s policy reforms and investment under Vision 2030 have transformed the Kingdom’s real estate landscape, making it one of the most dynamic markets in the region,” said Tarek Lotfy, president of Mercer in India, Middle East, and Africa, in an interview with Arab News.

He emphasized that these reforms have accelerated the sector by aligning with broader initiatives to increase homeownership, improve livability, and attract foreign investments. This has been achieved through eased ownership regulations and the creation of Special Economic Zones.

According to Sally Menassa, partner at Arthur D. Little Middle East, these reforms have included “easing foreign ownership restrictions, enhancing transparency in real estate transactions, introducing incentives for green building practices, and establishing a national framework for smart city development.”

The establishment of a real estate transaction registry has been a particularly significant step in boosting market confidence, as it reduces the risks of fraud and increases investor trust.

Menassa further highlighted the role of mega-projects in fostering investor confidence: “The involvement of the PIF in major development projects such as the Diriyah Gate Development reassures investors of the Kingdom’s commitment to high-quality, sustainable development and the stability of such developments.”

Lotfy added that alongside these advancements, the rapid pace of development has also created challenges, including increasing competition for skilled labor in construction and smart city infrastructure.

Recruitment and retention will be key themes in 2025, as companies will need to focus on developing long-term talent strategies, investing in training, and fostering a culture that attracts and retains top-tier talent, according to Lotfy.

Catalysts for transformation

Saudi Arabia’s giga-projects, led by the Public Investment Fund, underscore the Kingdom’s commitment to large-scale innovation and ambitious transformation. High-profile projects like NEOM, Qiddiya, and the Red Sea Global are set to redefine urban living, culture, and tourism.

NEOM alone spans 28,000 sq. km and is envisioned as a smart city powered by renewable energy and cutting-edge technology. Menassa emphasized the uniqueness of NEOM, pointing to initiatives like Oxagon, a floating industrial complex designed for sustainability and advanced technologies. “This is expected to attract high-tech industries and global talent, driving demand for residential and commercial properties,” she said.

Meanwhile, Qiddiya is being developed as a world-class entertainment hub, featuring theme parks, cultural centers, and sports complexes. Menassa added that Qiddiya’s growth as a major cultural and entertainment destination would further boost tourism and the hospitality sector, creating demand for mixed-use assets that combine retail, leisure, and residential components.

The Red Sea Project is another transformative initiative focused on sustainable tourism. According to Menassa: “Focusing on eco-friendly concepts and incorporating sustainable practices in its development, starting from construction, it (The Red Sea Project) will set new standards for regenerative and sustainable tourism and real estate development.”

Residential market

Saudi Arabia’s residential sector saw substantial growth in 2024, driven by government-backed initiatives and strong demand. Programs like Sakani and the National Housing Program have been essential in advancing the Vision 2030 goal of achieving 70 percent homeownership.

Menassa underscored the significance of these efforts: “The addition of over a million homes as part of Saudi Arabia’s residential expansion efforts, aligning with the goal of achieving a 70 percent homeownership rate under Vision 2030, is expected to significantly impact homeownership rates and affordability, creating a big socio-economic shift in the nation.”

A 38 percent increase in real estate transactions during the first half of 2024, valued at SR127.3 billion, highlights the sector’s dynamic growth. Cities like Riyadh and Jeddah have seen rising property prices, with Riyadh expected to reach a population of 10 million by 2030.

Hospitality and tourism

Tourism, a cornerstone of Vision 2030, has already surpassed expectations. The Kingdom achieved its target of 100 million visitors in 2023 and now aims to attract 150 million tourists annually by 2030.

“The 2034 FIFA World Cup will play an instrumental role in shaping the future of the short-term rental market in Saudi Arabia over the next 10 years,” said Anna Skigin, CEO of Frank Porter, in an interview with Arab News. “We will see a significant increase in the number of properties being developed as savvy investors look to capitalize on the announcement. We will also see more people buying properties and converting these into short-term rentals,” she added.

Short-term rentals are reshaping the tourism landscape, creating new opportunities for various types of travelers. Skigin noted: “There is the opportunity for larger groups to travel — potentially multi-generational family travel and other large groups of family and friends.”

She further explained, “Short-term rentals can cater to a variety of different budgets while offering more space than hotel rooms. These rentals also provide more privacy for travelers.”

Menassa also highlighted the Kingdom’s focus on luxury resorts, boutique hotels, and eco-friendly accommodations as part of its broader tourism strategy. Developments like Jeddah Al-Balad, Diriyah, and Qiddiya are generating demand for integrated, mixed-use assets, boosting both tourism infrastructure and the overall quality of life, she explained.

Proptech boom

Saudi Arabia’s digital transformation has positioned proptech as a key component in the evolution of its real estate sector. Innovations such as digital mortgages, AI-driven property recommendations, and virtual tours are revolutionizing the home-buying experience.

“Digital mortgages will allow streamlined processes, expediting the buying process by automating many of the steps involved, enhancing accessibility, and increasing transparency. Buyers can now compare rates, get pre-approved for loans from their homes, and explore homeownership opportunities with greater ease,” said Menassa.

She also highlighted the integration of smart city infrastructure like NEOM’s, which incorporates advanced technologies to enhance urban living.

“This also extends to urban planning and management, including advanced surveillance systems, smart street lighting, emergency response, traffic forecasting, and energy consumption management,” Menassa added.

Outlook

Despite its rapid growth, the Saudi real estate sector faces challenges such as economic volatility and rising project costs. Lotfy warned that as the Kingdom moves towards smart cities and sustainable development, the demand for advanced technical skills will increase.

However, the opportunities outweigh these challenges. Skigin concluded: “The Kingdom has been significantly pushing tourism for both international and domestic tourists,” and these efforts will continue to shape the future of Saudi Arabia’s real estate sector in the coming years.