Residential real estate sales plunge in 1Q on affordability, war uncertainty

The Kingdom’s residential market shrank by more than half in 1Q 2026, as the war compounded an affordability squeeze that prompted the government to step in last year. Residential sales in Saudi Arabia were down 53% y-o-y in the first quarter, according to data from the Justice Ministry tracked by Knight Frank.

The slowdown was already underway before missiles started flying in late February, as housing affordability is at the heart of declining activity rather than geopolitics, Knight Frank MENA research head Faisal Durrani tells EnterpriseAM.

Riyadh tells the clearest version of that story. Apartment prices in the capital have nearly doubled since 2019, and villa prices have climbed by over 50%, Durrani says. Meanwhile, “incomes have not kept pace with this level of house price growth, which has curbed [transaction] volumes.” Sales activity in the capital fell 83% y-o-y in 1Q, much higher than the 53% national decline.

The war hardened a “wait-and-see” stance among buyers. “It is understandable that families and households are reluctant to commit to what may be their largest ever financial commitment during a time of such heightened regional geopolitical uncertainty,” Durrani adds.

The war’s timing was awkward for the Kingdom’s foreign-buyer push. New rules opening the property market to foreign investors took effect in January, with the government targeting USD 85 bn in annual foreign property inflows by 2030. The map detailing where foreigners can buy was initially due in 1Q but has yet to be published.

REMEMBER- The government has been working on a diverse set of real estate reforms to face the soaring real estate prices, including Riyadh’s rent freezes, a vacant property tax regime, a 10% white land tax, and easing foreign ownership rules. This strategy seems to be starting to pay off as the Real Estate Price Index recorded its first annual decline in five years in 4Q 2025, and continuing a cooling trend 1Q 2026, with the residential sector accounting for the bulk of the downturn.

The medium-term outlook still points to a housing shortage, Durrani says. Saudi Arabia will require an estimated 830k housing units by 2034 just to meet population growth needs, he tells us. The present challenge for developers is alignment, as supply must better match household budgets so that affordability continues to anchor the market slowdown.

DATA POINT- Knight Frank research puts the ceiling Saudi nationals are willing to pay at SAR 1.5 mn per home, while high-net-worth foreign buyers will stretch to around USD 1 mn (SAR 3.75 mn).

ALSO- The Real Estate General Authority and the Justice Ministry have restricted real estate transactions in Riyadh exclusively to the Real Estate Registry, Argaam reports. This applies to ownership transfers, updating title deeds, mortgage services, and more. Rollouts to other cities will take place sequentially based on readiness.

ICYMI: The authority recently completed the registration of all real estate zones within Riyadh's urban areas, finalizing the city's digital map on the platform.