2025 was the year Riyadh’s red-hot real estate market met its regulatory ceiling. After apartment prices doubled in six years, the government stepped in with a flurry of reforms — rent freezes, a 10% white land tax, and easing foreign ownership rules — to force a correction.

It’s been a busy year: The Capital Markets Authority relaxed ownership rules for listed firms with holy city real estate assets, followed by the amendment to the White Land Tax Law in April, which hiked the rate to 10%, coinciding with the lifting of a land freeze on 81.5 sq km in Northern Riyadh. July saw the Cabinet approve the Foreign Property Ownership Law, and later in September, rent controls were implemented in Riyadh alongside the launch of the Tawazoun Platform to offer residential plots at capped prices.

Behind the interventions

The flurry of intervention measures came to restore the balance between supply and demand in the market, CEO of Coldwell Banker Saudi Arabia Youssef Khattar tells EnterpriseAM. A severe rise in prices of lands and units has negatively impacted everyone: landowners, developers, and Saudi citizens as the end users, Khattar said.

Affordability is the key word. Apartment prices nearly doubled over six years and villa prices rose by 50%, while “salaries have not necessarily kept pace,” resulting in a 30% drop in Riyadh sales volumes, MENA head of research Faisal Durrani tells us. Skyrocketing land costs also left developers with “little choice but to focus on luxury housing” to remain viable, while tenants faced 40% rent hikes.

Getting priorities straight: “The goal of getting the home ownership rate to 70% is probably more important than having huge flows of international FDI,” Durrani says, adding that prioritizing the domestic buyer shifts the goal toward ensuring housing remains a social utility rather than an inaccessible luxury.

White Land fees are putting the pressure on landowners

With the first invoices for White Land fees set to be issued tomorrow, the new tax on large undeveloped swaths of land in Riyadh is expected to pressure landowners into changing their game.

The tax hike ended the “buy and hold” model for land, leading to price corrections of up to 20% in some areas as speculations and complex family-owned plots become financially unsustainable, Durrani said. Prices went down even further by 40% in areas where supply was plenty, and Northern Riyadh was one of the areas that saw significant drops in prices as it had large swaths of undeveloped land, Khattar says.

Competition for the investor’s money is getting fierce: Landowners are increasingly entering into partnerships where they offer the land in-kind, spurring a race by developers to snap up the best opportunities as prices drop, Khattar says. “Funds have become very selective now. Landowners might face a slight crisis in attracting investors because opportunities are plentiful, and investors must choose the best ones based on location and land price,” Khattar says.

BUT- Developing just for the sake of avoiding fees is not a good move, and landowners still have to weigh projects against market demand and pricing. “The vast majority of existing projects in the Kingdom are managed by real estate funds, and funds will not invest in a project unless there is economic and financial feasibility,” he added.

To sell or not to sell, that’s the question

“A predictable consequence has been that many landowners are trying to sell because it’s no longer financially viable for them to hold the land,” Durrant said. Still, many plots are held in complex structures, making subdivision and sale challenging.

It depends on the landowner. “Individuals who inherit lands lean more toward selling, especially under the pressure of a tax, even if they will have to lower the price slightly to meet the market,” Khattar says. Meanwhile, companies and business people opt towards developing the land themselves or entering partnerships through real estate funds to realize more gains, he added.

Stopping the rent extravaganza in Riyadh

The five-year rent freeze in Riyadh on both new and existing contracts capped increases at September 2025 levels. The regulations mandate automatic lease renewals and restrict evictions to specific valid reasons, aiming to provide stability in a market where apartment rents had recently surged by 30-40% over the past 2-3 years.

We’re starting to see the impact — albeit slowly. Before the intervention, housing and utilities were the primary drivers of Saudi inflation, with rents rising 10.6% in 2024. By November 2025, the monthly growth in housing-related costs cooled to 4.3% y-o-y, the lowest reading since October 2022 and a significant drop from the 7.8% peak seen the previous year, though it was still mainly driven by housing rent increases.

Contrary to fears of deterring capital, Durrani argues the rent freeze strengthens the market by shielding it from speculative “flippers”. Rental yields “remain stable, and they are certainly more attractive than many other places in the world,” Durrani said. High organic demand from a young population provides long-term investment prospects that outweigh short-term yield limitations in the Kingdom, especially as many international economies face uncertainty, he added.

The missing middle: Build-to-rent

Durrani identified one of the gaps in Saudi’s market in 2025 as the lack of professionally managed build-to-rent housing. An influx of around 250k young Saudis into Riyadh has created demand not for four-bedroom villas, but for studios and one-bedroom apartments, yet developers remain largely locked into a build-to-sell model. “This type of professionally managed build-to-rent stock is common in major cities like London, New York, Dubai, or Singapore, but in Saudi, we don’t have that in large volumes… We see this as a big area of opportunity that developers are not yet looking at,” said Durrani.

Hello, foreign investors

Khattar thinks the Real Estate Foreign Ownership Law will be a major factor in reshaping real estate strategies in 2026, and the impact will largely depend on details of how the law will be implemented, set to be revealed in late January. “If a decision allows foreign ownership in Makkah, the strategic map of Makkah changes. Likewise, if foreign ownership is restricted to certain zones in Riyadh, landowners within those zones will consider projects targeting foreign segments, while other landowners will opt to redevelop products to target Saudis.”

Foreign demand is expected to be “sticky” and non-speculative, particularly in the Holy Cities. Knight Frank’s survey showed that 84% of Muslim high-net-worth investors prioritize Makkah and Madinah, driven by “human reasons linked to religion and culture” rather than financial yield. These buyers represent long-term, lifestyle-driven commitments rather than fast-moving capital.

Khattar agrees: “I don’t expect us to see speculation in the form we see in Dubai or other countries, where you buy and sell while the property is still under construction,” he says. Still, the huge increase in demand in Makkah and Madinah relative to the limited supply of residential units is expected to increase prices considerably.

Beyond these hubs, initial demand will likely stem from resident expats awaiting further regulatory clarity, Durrani said.

The influx of foreign buyers is also expected to spur intense competition regarding payment plans, Khattar says. The impact will depend on many factors, including whether real estate financing will be available for foreigners, and whether assets owned by non-Saudis will qualify for getting asset-backed financing from banks, Khattar added.

To spur FDI growth, the kingdom will also need to establish strong investor protections, including escrow accounts and international banking partnerships, Durrani said.

The 2026 outlook

Khattar thinks it’s too early in the game to talk about 2026 with any certainty. While changes in demand can be fast, development projects need two-to-three years before generating a substantial supply of residential or commercial units. Increasing supply will also be balanced by even more demand to meet the needs of upcoming global events, including the 2027 Asian Cup, the 2030 Expo, and the 2034 World Cup, Khattar said.

Recalibration of gigaprojects is expected to redirect significant liquidity into other developments with greater impact on main cities, Khattar says. “Today, King Salman Gate is more attractive for investors than Neom, […] which is more of a qualitative project targeting specific investments in technology and energy rather than increasing supply or resolving housing problems.” Redirecting liquidity strategically to fewer projects reflects more positively on major cities and the economy as a whole, he added.

Caution is the name of the game: Developers are now in a wait-and-see crouch, reluctant to buy until a new price floor is established, creating a temporary vacuum that will shape the market in 1H 2026, Durrani says. They recognize the long-term need — by 2034, Saudi Arabia will require 830k homes for a growing population — but opt to wait for price stability before committing to new projects.

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