Home buying activity in Saudi Arabia has experienced a substantial decline in the first quarter of this year, as soaring prices and rate increases have deterred potential buyers. According to Knight Frank's latest update, new deals witnessed a significant drop of nearly 57% in Riyadh and 67% in Jeddah during this period. The upward trajectory of villa prices in Riyadh, growing by 40% in 2022, and apartment prices surging by 50%, has put considerable strain on demand.

Faisal Durrani, Head of Middle East Research at Knight Frank, highlights that households are compelled to enter a holding pattern as they save for increasingly larger deposits. The escalating prices and the transition from renting to owning have likely already been undertaken by many individuals. Currently, the home ownership rate stands at approximately 67%, just below the government's target of 70% by 2030.

In light of these challenges, the onus is now on developers to devise strategies to counteract the price hurdle. The market may witness more financing options from developers to attract end-users and investors, while mortgage financiers could also offer support. However, given the previous rate hikes, there are limitations to the extent of their impact.

A notable trend among young Saudis is their mobility and preference for renting rather than owning a home. With approximately 56% of the population under 35 years old, they tend to move from city to city in pursuit of career opportunities. According to Durrani, nearly 68% of Saudis do not consider themselves permanent residents of their current cities, indicating that they were born elsewhere in the country. This group demonstrates a higher inclination towards renting, leading some vendors to shift properties from the sales market to the leasing market, further reducing available stock for purchase and contributing to the high home price environment.