Saudi Arabia Opens Property Market to Foreign Investors

Saudi Arabia is preparing to open its real estate market to foreign ownership under a new law that will take effect in January 2026, marking one of the most consequential reforms of the Kingdom’s investment framework in decades. Embedded within the broader Vision 2030 agenda to build a diversified global economy, the reform positions Saudi Arabia in sharp contrast to countries such as Australia, where foreign participation in residential property remains tightly controlled and heavily taxed.

The Law on Real Estate Ownership and Investment by Non-Saudis, approved and published in 2025, replaces the restrictive and fragmented regime that has governed foreign ownership since 2000. At its core, the law grants non-Saudis—both individuals and legal entities—the right to own real estate or acquire real property rights, subject to conditions to be set out in executive regulations and Cabinet-approved geographic zones.

The reform is designed to attract foreign capital into a sector that sits at the heart of Saudi Arabia’s economic diversification strategy. Real estate underpins flagship projects such as NEOM, the Red Sea development and Qiddiya, and policymakers increasingly view international investors as critical to scaling these developments.

While foreign individuals may own property or real estate rights in designated areas, but they require ownership to be formally registered in the national real estate registry. The move signals a shift from discretionary approvals towards a rules-based framework intended to provide legal certainty for investors.

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For expatriates and long-term residents, the implications are significant. From 2026, a foreign professional working in Riyadh may be able to purchase a residential apartment in an approved zone, holding direct legal title rather than relying on long-term leases or complex structures. For corporate investors, it is permissible for foreign companies and licensed investment entities to own property required for business operations, employee housing or investment purposes.

A multinational firm establishing regional headquarters in Jeddah, for example, could own offices, warehouses and staff accommodation outright, provided the assets fall within permitted zones and align with licensed activities. This stands in marked contrast to earlier arrangements that required local partners or indirect ownership.

The law also draws firm boundaries around sensitive areas. It provides that ownership in Makkah and Madinah will remain subject to special restrictions, reflecting their religious significance. While the executive regulations have yet to be finalised, full freehold ownership by non-Muslims in these cities is widely expected to remain prohibited.

Taxation: A Key Point of Divergence

Beyond ownership rights, the tax treatment of property investment highlights a fundamental difference between Saudi Arabia and Australia.

In Saudi Arabia, real estate transactions are subject to a Real Estate Transaction Tax (RETT), currently set at 5 per cent of the sale value, payable on most property transfers regardless of the seller’s residency. This tax effectively replaces capital gains tax on direct real estate disposals.

Notably, rental income earned by individual investors is generally not subject to income tax, a feature that significantly enhances post-tax yields. For corporate investors, rental income forms part of taxable business income and is subject to corporate income tax (typically 20 per cent for foreign-owned entities).

Capital gains on the sale of property by individuals are not taxed separately; instead, the 5 per cent transaction tax applies at disposal. This creates a relatively simple and predictable tax outcome for foreign investors.

Australia presents a sharply different picture. Foreign investors face multiple layers of taxation. Rental income derived from Australian property is subject to income tax at marginal rates, with foreign individuals taxed at non-resident rates that exclude the tax-free threshold. Corporate investors are taxed at the standard corporate rate.

Capital gains on the sale of Australian property are fully taxable. Foreign investors are not eligible for the 50 per cent capital gains tax discount available to residents for assets held longer than 12 months. In addition, Australia imposes a capital gain withholding tax (currently 15 per cent) on the sale of taxable Australian property by foreign residents, collected at settlement.

Transaction costs further widen the gap. In Australia, foreign buyers typically face stamp duty surcharges, which vary by state but can add 7–8 per cent or more to acquisition costs, alongside higher land tax rates. By contrast, Saudi Arabia’s tax burden is largely confined to the single transaction tax.

Policy Philosophy and Market Impact

The divergence reflects contrasting policy priorities. Saudi Arabia is using tax simplicity and ownership reform to position real estate as a conduit for foreign direct investment, supporting large-scale development and capital inflows. Australia’s framework, by contrast, is deliberately restrictive, designed to protect housing supply and affordability for domestic buyers.

Enforcement mechanisms also differ in emphasis. Saudi Arabia’s law provides for fines of up to SAR10 million (AUD 4 million) and compulsory divestment for violations of law, signalling a strong compliance stance. Australia similarly enforces its rules through forced divestment and substantial penalties, but overlays these with ongoing tax and surcharge obligations.

For international investors, the implications are clear. Australia offers legal stability and market maturity but imposes high regulatory and tax barriers. Saudi Arabia, while still finalising its regulatory details, is offering a comparatively low-tax environment and expanding ownership rights in a rapidly developing market.

As the Kingdom prepares to implement the new law in 2026, global investors will be watching closely. At a time when many advanced economies are tightening restrictions on foreign property ownership, Saudi Arabia’s reforms—particularly when combined with its tax settings—signal a clear intent to compete aggressively for international capital.