{"id":103550,"date":"2025-12-31T00:00:00","date_gmt":"2025-12-31T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/?p=103550"},"modified":"2025-12-31T05:06:00","modified_gmt":"2025-12-31T05:06:00","slug":"the-big-reform","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2025\/12\/31\/the-big-reform\/","title":{"rendered":"The Big Reform"},"content":{"rendered":"<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong> 2025 was the year Riyadh\u2019s red-hot real estate market met its regulatory ceiling<\/strong>. After apartment prices doubled in six years, the government stepped in with a flurry of reforms \u2014 rent freezes, a 10% white land tax, and easing foreign ownership rules \u2014 to force a correction.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>It's been a busy year: <\/strong>The Capital Markets Authority <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/e62966e6-8805-4fb4-af55-4385b5f42bd7\/foreign-investors-can-now-buy-shares-of-listed-companies-with-real-estate-assets-in-the-holy-cities\" style=\"\" rel=\"noopener\">relaxed<\/a> ownership rules for listed firms with holy city real estate assets, followed by the amendment to the <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/4cc7fd73-71f8-412d-9feb-abf0b92fb8bd\/final-regs-for-white-land-tax-law-are-out\" style=\"\" rel=\"noopener\">White Land Tax Law<\/a> in April, which hiked the rate to 10%, coinciding with the lifting of a land freeze on 81.5 sq km in <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/12b30af9-a72f-4e17-a335-a1a77899b104\" style=\"\" rel=\"noopener\">Northern Riyadh<\/a>. July saw the Cabinet approve the <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/268e8967-967e-47b8-b55b-e66f743e2692\/non-saudis-to-buy-saudi-property-%25e2%2580%2594-under-a-few-conditions\" style=\"\" rel=\"noopener\">Foreign Property Ownership Law<\/a>, and later in September, <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/5ab3b685-2a9a-425b-b8bc-526f7ed48d07\/riyadh-sets-new-rent-rules\" style=\"\" rel=\"noopener\">rent controls<\/a> were implemented in Riyadh alongside the launch of the Tawazoun Platform to offer residential plots at capped prices.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">Behind the interventions<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The flurry of intervention measures came to restore the balance between supply and <\/strong><strong>demand in the market<\/strong>, 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Affordability is the key word<\/strong>. Apartment prices nearly doubled over six years and villa prices rose by 50%, while \u201csalaries have not necessarily kept pace,\u201d resulting in a 30% drop in Riyadh sales volumes, MENA head of research Faisal Durrani tells us. Skyrocketing land costs also left developers with \u201clittle choice but to focus on luxury housing\u201d to remain viable, while tenants faced 40% rent hikes.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Getting priorities straight: <\/strong>\u201cThe goal of getting the home ownership rate to 70% is probably more important than having huge flows of international FDI,\u201d Durrani says, adding that prioritizing the domestic buyer shifts the goal toward ensuring housing remains a social utility rather than an inaccessible luxury.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">White Land fees are putting the pressure on landowners<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The tax hike ended the \u201cbuy and hold\u201d model for land<\/strong>, 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Competition for the investor\u2019s money is getting fierce: <\/strong>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. \u201cFunds 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,\u201d Khattar says.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>BUT- Developing just for the sake of avoiding fees is not a good move<\/strong>, and landowners still have to weigh projects against market demand and pricing.<strong> \u201c<\/strong>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,\u201d he added.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">To sell or not to sell, that\u2019s the question<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\u201cA predictable consequence has been that many landowners are trying to sell because it\u2019s no longer financially viable for them to hold the land,\u201d Durrant said. Still, many plots are held in complex structures, making subdivision and sale challenging.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>It depends on the landowner<\/strong>. \u201cIndividuals 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,\u201d 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">Stopping the rent extravaganza in Riyadh<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>We\u2019re starting to see the impact \u2014 albeit slowly<\/strong>. Before the intervention, housing and utilities were the primary drivers of Saudi inflation, with rents rising 10.6% <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/0c038b45-82ea-402d-8c66-d8f0e6434102\/saudi%25e2%2580%2599s-2024%253cmark%253e-inflation%253c%2Fmark%253e-rounds-out-to-1.7%2525\" style=\"\" rel=\"noopener\">in 2024<\/a>. By <a target=\"_blank\" href=\"https:\/\/enterprise.news\/ksa\/en\/news\/story\/6014be53-16d6-4665-9139-e7e8aeac251b\/housing-costs-log-slowest-increase-in-over-three-years-in-november\" style=\"\" rel=\"noopener\">November 2025<\/a>, 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Contrary to fears of deterring capital,<\/strong> Durrani argues the rent freeze strengthens the market by shielding it from speculative \u201cflippers\u201d. Rental yields \u201cremain stable, and they are certainly more attractive than many other places in the world,\u201d 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">The missing middle: Build-to-rent<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">Durrani identified one of the gaps in Saudi\u2019s 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. \u201cThis 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,\u201d said Durrani.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">Hello, foreign investors<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">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. \u201cIf 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.\u201d<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Foreign demand is expected to be \u201csticky\u201d and non-speculative<\/strong>, particularly in the Holy Cities. Knight Frank\u2019s survey showed that 84% of Muslim high-net-worth investors prioritize Makkah and Madinah, driven by \u201chuman reasons linked to religion and culture\u201d rather than financial yield. These buyers represent long-term, lifestyle-driven commitments rather than fast-moving capital.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Khattar agrees: <\/strong>\u201cI 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,\u201d 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Beyond these hubs<\/strong>, initial demand will likely stem from resident expats awaiting further regulatory clarity, Durrani said.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The influx of foreign buyers is also expected to spur intense competition regarding <\/strong><strong>payment plans<\/strong>, 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>To spur FDI growth<\/strong>,<strong> the kingdom will also need to establish strong investor protections<\/strong>, including escrow accounts and international banking partnerships, Durrani said.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">\n<p class=\"tag-border-left\">The 2026 outlook<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Khattar thinks it\u2019s too early in the game to talk about 2026 with any certainty<\/strong>. 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.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Recalibration of gigaprojects is expected to redirect significant liquidity into other <\/strong><strong>developments with greater impact on main cities<\/strong>, Khattar says. \u201cToday, 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.\u201d Redirecting liquidity strategically to fewer projects reflects more positively on major cities and the economy as a whole, he added.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Caution is the name of the game:<\/strong> 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 \u2014 by 2034, Saudi Arabia will require 830k homes for a growing population \u2014 but opt to wait for price stability before committing to new projects. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>The flurry of intervention measures came to restore the balance between supply and demand<\/p>\n","protected":false},"author":1,"featured_media":103551,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4797],"tags":[10,106,4796],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-103550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-year-in-review","tag-enterpriseam-ksa","tag-real-estate","tag-year-in-review","wpautop","entry"],"acf":{"mongo_id":"55a25400-6482-4d22-b00a-ebdf301d3a84","order":"3","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/2\/951.jpg","photo_position":"above","homepage_title":"","full_issue_title":"The Big Reform of Saudi\u2019s real estate market in 2025","related_issue":[103545],"teaser":"The flurry of intervention measures came to restore the balance between supply and demand"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.1.1) - 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