The Saudi Arabian residential real estate market experienced a sharp slowdown in the first quarter of 2026, with transaction volumes falling 50% year-on-year to 29,490 units. According to Knight Frank, the total value of these transactions dropped by 57% to 22 billion riyals, as rising costs and regional geopolitical tensions weighed on buyer demand.
Why is the residential market slowing down?
Knight Frank attributes the decline in market activity to growing pressures regarding housing affordability and a noticeable cooling in demand for mortgage financing. The firm also notes that negative sentiment stemming from regional conflict has played a significant role in softening market appetite.
While the downturn was felt across the Kingdom—including in Jeddah, the Dammam metropolitan area, Makkah, and Madinah—it was most severe in Riyadh. The capital saw an 82% decline in both the volume and value of residential transactions compared to the same period in 2025.
Despite the significant drop in overall transaction volume, residential property prices in major Saudi markets continued to climb during the first quarter of 2026, reflecting price resilience recorded in January and February.
How are property prices performing?
Even with low transaction volumes, property prices have demonstrated growth in key urban centers. Knight Frank reports that apartment prices in Riyadh rose 6.3% year-on-year, while villa prices in the capital increased by 4.9%.
Similar trends were observed in other regions, with apartment prices in Jeddah growing by 2% and those in the Dammam metropolitan area rising by 2.3%. Analysts at the firm suggest that these figures reflect price stability from earlier in the quarter, before the full effects of regional instability were realized in broader transaction data.
The divergence between falling transaction volumes and rising property prices suggests a market in transition. While buyers are currently deterred by financing hurdles and regional uncertainty, the persistence of price growth indicates that supply-side constraints remain a dominant force, potentially keeping entry costs high for prospective homeowners despite the cooling demand.
What is the outlook for residential and office supply?
The National Housing Corporation remains the primary driver of residential supply growth, with plans to deliver integrated communities across the Kingdom. Projections suggest the residential stock in Riyadh could expand from 2.7 million units in 2025 to over 3.3 million by 2030.
In contrast, the office market in Riyadh remains robust. According to Knight Frank, office occupancy rates in the capital reached 97% in the first quarter of 2026, with rents for Grade A office space rising 2.5% to 2,770 riyals per square meter. A significant expansion in office inventory is expected, with stock in Riyadh projected to grow from approximately 6 million square meters in 2025 to over 10.6 million square meters by 2032.
Frequently Asked Questions
What was the primary reason for the decline in residential transactions?
Knight Frank cites a combination of housing affordability pressures, reduced demand for mortgage loans, and negative sentiment linked to regional conflicts.
Which city experienced the most significant drop in property activity?
Riyadh saw the most dramatic slowdown, with an 82% decrease in both the volume and value of residential transactions.
Is the office market in Riyadh facing the same challenges as the residential sector?
No, the office market remains strong, characterized by high occupancy rates of 97% and rising rental costs for Grade A spaces due to limited supply.
How might the significant increase in projected office supply by 2032 impact rental rates for businesses in Riyadh?
