Citizens can sign up for state-subsidised bank loans to buy homes newly built at the suburbs of major cities like Riyadh. Such subsidized loans can improve housing affordability, particularly for middle- and lower-income citizens, fostering social stability and increasing overall homeownership rates, which is one of the key goals of Vision 2030. More recently, the kingdom has decided to lift restrictions on land transactions and development in northern Riyadh.

 

That said, it’s important to note that the interest rates are still way higher than their level in February 2022 (1%), when they started rising until they reached a peak of around 6% in mid 2024, before they started slightly falling again until they reached around 5%. The continuing increase in borrowing costs can still pose a challenge for the citizens with limited disposable income.

 

Secondly, private credit has expanded in the kingdom from focusing initially on small and medium-sized enterprises to competing for a share in the real estate mortgage.

 

This growing role of private credit is boosted by the expected cautious approach from the traditional lenders, which has resulted in a funding gap in a ‘crowded’ market, where traditional lenders compete for nearly similar deals for hopeful buyers, who want to get into the property ladder.

 

Some private credit lenders not only provide competitive interest rates, but also focus on those who don’t typically qualify for traditional mortgages from banks.

 

But more importantly, these private credit firms provide debt financing to major borrowers such as real estate developers or corporations, because they later pool these loans together into a diversified debt portfolio. They structure this pool into bonds of varying risk levels based on the creditworthiness of the underlying loans. These bonds are then sold to institutional investors such as insurers, pension funds, or asset managers.

 

Finally, the shift in the preferences of the concept of home in the kingdom is quite reflected in how developers and planners are increasingly favoring vertical developments—such as high-rise apartments and mixed-use towers—to maximize land use efficiency and accommodate the growing urban population.

 

Middle-income buyers find apartments significantly more affordable than villas and town houses. This change in taste makes vertical living more attractive from an economic standpoint.

 

The shift in lifestyle preferences in Saudi Arabia towards vertical living is further exemplified by the growing demand for smaller, more manageable housing options such as two-bedroom apartments. These smaller units cater specifically to young professionals, small families, and middle-income citizens and residents who prioritize affordability.