Saudi Arabia’s residential property market has seen a slowdown in buying activity, but the cost of owning homes in the kingdom is still rising.

In 2023, various residential markets in the kingdom recorded declines in the value and volume of transactions, particularly in Riyadh, Jeddah and Dammam. 

The three markets collectively registered 67,233 deals worth SAR 79 billion ($21 billion), down by 15% in value compared to 2022, Deloitte reported on Thursday.

However, sales prices and rents for villas and apartments have continued to post notable growth, especially across Riyadh and Jeddah.  Sales rates in Riyadh went up by 5% and 8% for villas and apartments, respectively.

The Saudi market has also seen a preference for affordable units amid high interest rates. In Riyadh, around 80% of apartments sold in the last 12 months were priced between SAR 250,000 and SAR 1 million, primarily catering to the low to mid-income segments of the market.

“The residential market’s demand has shifted to apartment stock as affordability continues to be a key driver amidst a backdrop of higher interest rates,” said Stefan Burch, Partner and Head of Real Estate at Deloitte Middle East.

With prices a key driver for a lot of buyers, certain destinations that offer affordable stock like South Riyadh have seen a significant influx of property investors.

“While North Riyadh has emerged as a prominent residential hub, South Riyadh has witnessed maximum growth in the share of transactions in the last five years, mainly due to availability of affordable stock,” the report said.

Residential supply in Saudi’s key markets continued to increase last year, with new projects delivered in Al Majidiah 139 and Ajlan Riviera 37 in Riyadh, along with Itlalat Al Bahar and Al Wajiha in Dammam.

Riyadh had the highest residential supply as of the fourth quarter of 2023, with 1.9 million units, followed by Jeddah with 1.1 million units and Dammam Metropolitan Area (DMA) with 0.76 million units.

(Writing by Cleofe Maceda; editing by Seban Scaria)