Have you ever wondered why real estate prices in some Saudi cities rise significantly compared to others? The answer isn’t just about location or construction quality; it extends to a significant influencing factor: population growth. 

As the population increases, the nature of demand in the Saudi real estate market changes, which directly affects property values. In this article, we will discuss the impact of Saudi Arabia’s population on the real estate market and how real estate valuation helps mitigate risks and support investment decisions.

What is the trend in population growth in Saudi Arabia?

Population growth in Saudi Arabia has been on a steady upward trend in recent years, with estimates indicating that the population will exceed 35 to 36 million by 2026. The Kingdom’s population accounts for approximately 0.42% of the world’s total population, ranking it 47th globally in terms of population size, which reflects a significant demographic presence in the region. 

One of the Kingdom’s key characteristics is its low population density, estimated at approximately 16 people per square kilometer, due to its vast geographical area. However, the urbanization rate within this demographic is high, with over 90% of the population living in urban areas, which increases pressure on real estate demand in major cities. 

The average age of Saudi Arabia’s population is approximately 29.7 years, making it a young society with a growing trend toward the formation of new families, which also contributes to rising future demand for residential units. 

What is the impact of population growth on the real estate market?

Saudi Arabia’s population growth has a significant impact on the real estate market, primarily by driving up demand, which in turn affects prices. It also plays a role in the success of government initiatives in the housing sector, increases investment, and has other important effects on the real estate market, which can be summarized as follows:

• Rise in the value of real estate transactions: 

The Saudi real estate market has recently witnessed an increase in the value of transactions due to population growth and rising demand for housing and infrastructure. This has contributed to rising prices, particularly in residential real estate, while commercial real estate has achieved even greater growth, reflecting the sector’s strength and continued expansion.

• Increased real estate activity: 

The real estate sector is one of the sectors experiencing remarkable growth and clear expansion in recent times, particularly with Vision 2030. This has been clearly reflected in residential sales in major cities such as Riyadh, Jeddah, and Dammam, where values have risen significantly, confirming the continued strong demand for residential real estate. Nevertheless, recent government decisions have helped regulate the market, particularly with the enactment of the White Land Fees Law.

• Urbanization Trend:

Young people constitute the largest segment of Saudi Arabia’s population, and they tend to move toward cities and away from rural areas as these better suit their needs. There has also been increased demand for urban housing such as apartments and small residential units, rather than large houses, reflecting changing lifestyles and real estate market requirements.

• Government Initiatives: 

One of the most significant impacts of Saudi Arabia’s population growth is the government’s goal to raise the homeownership rate to 70% by 2030. To this end, it has launched a series of initiatives and programs offering flexible financing options, which have enabled a broad segment of citizens to own homes, thereby supporting housing stability and contributing to the growth of the Saudi real estate market.

From the above, we can conclude that the real estate market in the Kingdom of Saudi Arabia is experiencing rapid growth due to the increase in the Saudi population, which has led to higher urbanization rates; the government’s support for homeownership and housing projects; and other factors contributing to the continued expansion of the construction and urban development sector, thereby bolstering the strength of the Kingdom’s real estate market.

What is the purpose of a real estate valuation?

A real estate valuation is a professional process that helps determine the true market value of a property. It is conducted by a real estate valuer certified by the Saudi Authority for Certified valuers or by real estate valuation firms. The valuer examines various factors, such as the property’s location, size, interior design, regular maintenance, and all external factors surrounding it, along with an analysis of the real estate market. The valuer then prepares a property valuation report containing the property’s true value.

With the growing population of Saudi Arabia, real estate valuation has become an important tool to help you before making any investment decision. Its importance lies in:

• Determining the fair market value so that you do not pay an inflated price for a property or selling property for less than its true value.

• Real estate valuation helps you minimize risks, as a certified valuer assesses the property’s condition and market conditions before buying or selling, thereby reducing the likelihood of unexpected losses.

• It helps you make informed decisions, as the valuer provides you with the full picture before making any decisions regarding real estate investment, buying, selling, and other matters.

• It is an important and necessary step in real estate financing, as banks rely on it to determine the value and terms of the mortgage based on a certified real estate valuation report.

From the above, we conclude that real estate valuation is an important and indispensable tool, especially given the growth of the real estate market and the increasing population of Saudi Arabia, as it helps achieve a balance between supply and demand and ensures successful investment decisions, thereby increasing the stability of the Saudi real estate market and limiting potential risks.

In conclusion

With Saudi Arabia’s growing population and the expansion of the real estate market, investment decisions are no longer based solely on location or property type; rather, they are now closely linked to demographic shifts and urbanization patterns. Despite these developments, property valuation remains an indispensable tool that helps regulate the market, determine the fair value of properties, and support more informed investment decisions. At Aain Real Estate valuation, we help you determine the true value of your property through certified and accurate valuation reports, empowering you to make successful decisions, whether you are looking to buy, sell, or invest. Contact now one of the leading real estate valuation companies in the Kingdom today, and don’t leave your decision to chance.

Frequently Asked Questions:

• Does real estate protect against inflation?

Yes, real estate investment is considered a successful hedge against inflation, as property prices and rents tend to rise with increasing inflation rates, helping to preserve capital value over time. However, this depends on several factors such as the property’s location, the quality of the investment, and the state of the real estate market. Therefore, it is advisable to rely on an accurate property valuation before purchasing to ensure you choose a property that yields a suitable return and retains its value.

• Is Saudi Arabia a good place for real estate investment?

Saudi Arabia is considered an attractive destination for real estate investment, thanks to its economic and legislative stability, as well as the continuous growth of the real estate market. The relatively low population density, combined with urban expansion and increasing urbanization rates, contributes to creating diverse investment opportunities, especially in major cities. The Kingdom has also increased investment appeal by offering numerous incentives, such as allowing non-Saudis to own property under specific regulations, alongside other programs like the property owner residency program, which encourages local and international investors to enter the market with greater confidence.

• What are the accredited real estate valuation companies in Saudi Arabia?

There are many real estate valuation companies that have obtained the necessary accreditations to operate in the Kingdom, including Aain Real Estate valuation Company, which has over five years of experience and a professional team of valuers accredited by the Saudi Authority. It also serves a wide range of clients, whom it has helped make the best investment decisions.