Saudi banks’ real estate loans reached SR816.83 billion ($217.82 billion) in the second quarter of 2024, marking a 12% year-on-year increase, according to data from the Saudi Central Bank (SAMA). This figure represents nearly 30% of the banks’ total loan portfolios for the period, highlighting the sector’s growing importance within the financial system.
Retail real estate loans accounted for the largest portion, comprising 79% of the total, with an annual growth of 10%, reaching SR641.72 billion. Meanwhile, corporate real estate loans, which make up 21% of the total, grew at a faster pace of 18%, totaling SR175.12 billion.
Over the past five years, the share of real estate loans within Saudi banks’ portfolios has grown significantly. In 2019, they represented 17% of total lending, rising to 28.5% in 2022, and 29.7% by mid-2024. This expansion is fueled by key factors such as urban development, changing lifestyle preferences, increased demand for residential and commercial properties, and supportive government policies, particularly under Vision 2030.
The Kingdom’s real estate market has been buoyed by strong demand for residential units, commercial spaces, and hospitality venues, particularly as mixed-use developments gain traction. These large-scale projects blend residential, commercial, and recreational areas, creating dynamic communities that cater to evolving demographic needs.
In parallel, home financing has experienced robust growth, aligning with the government’s goal to increase homeownership among Saudi nationals to 70% by 2030. This has been supported by regulatory changes that increased loan-to-value ratios and the establishment of the Saudi Real Estate Refinance Company (SRC), which facilitates mortgage-backed securities for investors.
Despite challenges posed by rising interest rates, closely tied to U.S. monetary policy, the Saudi real estate market has shown resilience. Large construction initiatives backed by the Public Investment Fund (PIF) have maintained momentum, while buyers have adjusted to the higher interest rate environment, driving demand for mortgages.
As Saudi Arabia continues its economic diversification efforts, the real estate sector stands out as a key investment opportunity, attracting both local and international players.
