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Recent official data reveals that in the first quarter of 2024, Saudi banks' real estate loan portfolio reached 800.5 billion Saudi Riyals (approximately 1.6 trillion RMB), marking a 13% increase compared to the same period last year. This data reflects the robust demand in Saudi Arabia's real estate market, particularly notable in the significant growth of corporate loans.

According to the Saudi Central Bank (SAMA), 78% of these loans were retail loans, while 22% were corporate loans. Although personal loans make up the largest share of real estate loans, their annual growth rate was only 10%, in contrast to a 26% growth rate for corporate loans. This disparity is mainly attributed to factors like high interest rates, which suppress individual borrowing, while corporate loan demand has notably increased.

The rapid implementation of large-scale projects under Saudi Vision 2030 is the primary driver of corporate loan growth. These extensive projects require substantial financing, thus boosting the demand and growth of corporate real estate loans. Furthermore, data from the General Authority for Statistics indicates that residential real estate prices increased by 1.2% in the first quarter of this year, while commercial real estate prices fell by 0.5%. This pricing trend makes commercial properties more attractive and affordable for corporate investors, further driving the growth of commercial real estate loans.

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Despite the relatively slow growth in the personal real estate loan market, it still shows some vitality. According to SAMA, the total amount of new housing mortgages issued by banks to individuals in the first four months of 2024 was 274.4 billion Saudi Riyals, a 2% increase from the same period last year. Among these, home purchase loans accounted for 67% (182.5 billion Saudi Riyals), although home purchase loans decreased by 1%. In contrast, loans for apartment purchases grew by 9% to 76 billion Saudi Riyals, and land loans increased by 5% to 16.2 billion Saudi Riyals.

Saudi Arabia has ambitious plans to double the population of Riyadh by 2045 and attract 9 million people to "The Line," a revolutionary city development project. Many new arrivals will be expatriates, benefiting from recent visa reforms. The Premium Residency Program offers property and business ownership and the right to work without a sponsor, aiming to attract high-skilled expatriates, investors, and entrepreneurs to create jobs and bring in investments.

According to a survey by global real estate consultancy Knight Frank, 77% of expatriates in Saudi Arabia want to buy property. Purchasing real estate is seen as a good investment, particularly among millennials. Most respondents are shifting from villas to apartments, possibly due to the higher costs associated with villas, affordability considerations, and cultural preferences.

Following the global financial crisis, over-collateralization and full-recourse financing have become more common. Borrowers now face stricter requirements, including lower loan-to-value (LTV) ratios. SAMA has set the LTV cap for housing mortgages at 90%, aiming to promote homeownership while maintaining a stable and sustainable housing market and financial system.

Despite the strong demand for housing, Saudi Arabia's mortgage market is still developing, and consumer lending practices remain stringent. It is expected that once the Real Estate Mortgage Law is enacted and enforced, this stringent lending environment will become even more rigorous.