Saudi Arabia taking steps to increase
housing supply in the country
Saudi Arabia has implemented new land tax regulations aimed
at spurring real estate development and increasing housing supply in the
kingdom. The updated rules, which took effect this month, raise the annual levy
on undeveloped land to as much as 10% of the land's value. Additionally, fees
of 5% to 10% have been introduced for long-term vacant buildings.
The changes target land plots larger than 5,000 square
meters within approved urban boundaries, according to the Ministry of
Municipalities and Housing. These measures are part of broader government
reforms as Saudi Arabia prepares to open up property ownership to foreign
buyers starting in January 2026, with a focus on Riyadh and Jeddah.
By raising taxes on undeveloped land and vacant buildings,
the government aims to encourage landowners to develop, sell, or lease their
properties, thus increasing the supply of real estate projects. Nils Vanhassel,
Legal Director and Tax Advisor at DLA Piper Middle East, explained that these
reforms will push landowners to make better use of their properties, which
could help balance supply and demand, stabilize land prices, and improve
housing affordability as part of Saudi Arabia’s Vision 2030.
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These changes come as part of the kingdom's broader push to
diversify its economy and attract foreign direct investment, moving away from
oil dependence. The reforms touch various sectors, including property, stock
markets, and company governance.
Attracting foreign investment and boosting housing supply
As part of these efforts, Saudi Arabia last month updated
its rules to allow foreign nationals to purchase property in specific areas of
Riyadh and Jeddah. There are also special provisions for foreign ownership in
Makkah and Madinah. Additionally, foreign citizens can now invest in publicly
listed local companies owning real estate in these two holy cities, signaling
the kingdom’s ambition to attract international investors and bolster its
capital markets.
The country is also opening its stock exchange to Gulf
residents, who can now directly invest in the Tadawul market. These efforts
align with Saudi Arabia’s objective to raise homeownership among its citizens
to 70% by 2030. Recent reports show that the homeownership rate reached 63.7%
by the end of 2023, surpassing the 2023 target of 63%.
Rising land development and real estate transactions
As of mid-2025, over 5,500 undeveloped plots, totaling
around 411 million square meters, have been identified under the white land tax
regime across Riyadh, Jeddah, Makkah, and Dammam. This marks a significant
increase from the 1,320 plots totaling 387 million square meters covered under
the original 2017 law.
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While the full impact of the new land tax will take time to
unfold, with projects often requiring several years to complete, experts
believe the measures will prompt many developers to re-enter the market. Rahul
Bansal, head of strategic consultancy for Savills Middle East, noted that these
reforms could encourage developers who had previously delayed projects to move
forward. Some may even seek partnerships to bring new opportunities to life.
Foreign developers are already exploring the Saudi market.
For instance, the Trump Organization, in partnership with London-listed Dar
Global, launched a $533 million residential project in Jeddah and is
considering additional projects in Riyadh.
Price surge and market impact
Despite these efforts to increase housing supply, property
prices in Saudi Arabia's key cities have continued to rise. In Riyadh,
apartment prices have surged by 82% since 2019, while villa prices have climbed
nearly 50% over the same period. Faisal Durrani, head of research for MENA at
Knight Frank, suggests that the increased land tax could help ease some of the
pressure by unlocking more development sites and potentially slowing the rate
of land price growth.
In turn, this could help make housing more affordable for
Saudi nationals. Durrani cited recent findings showing that two-thirds of
Saudis are willing to spend a maximum of 1.5 million riyals on a new home.
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The new tax measures are expected to contribute to a further
increase in real estate transactions. In 2024, the total number of real estate
deals in Saudi Arabia rose by 37% to more than 236,690 transactions. The total
value of these transactions grew by 27% to 267.8 billion riyals, with
residential deals accounting for over 61% of the total value.
Looking ahead
As Saudi Arabia continues to expand and reform its real
estate market, the new land tax is seen as a pivotal step in addressing both
supply and affordability issues. With growing foreign interest and increased
domestic investment, the kingdom’s property sector is poised for significant
growth in the coming years.
Source: The National
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