Samer Choucair: Saudi Mortgage Recovery Opens a New Capital-Allocation Window in Q4 2026
Investment leader Samer Choucair said Saudi Arabia’s mortgage market is beginning to move closer to the end of the slowdown that extended through 2025 and the first half of 2026. The decline in new mortgage contracts, he argued, did not eliminate structural housing demand. Instead, it reshaped the supply side of the market around financing costs, banks’ ability to recycle mortgage portfolios, and the continued expansion of housing programs under Saudi Vision 2030.
Choucair said the roughly 12% decline in new residential financing during 2025 to approximately SAR 80 billion, followed by weaker new-contract values during the first half of 2026, has changed the central investment question. Investors are no longer asking simply when mortgage growth will return. They are asking when purchasing power will recover.
Saudi household homeownership reached approximately 66% by the end of 2025, compared with a target of 70% by the end of the decade. Samer Choucair said closing that gap will require more affordable financing and housing supply aligned with household purchasing power, rather than simply increasing the number of residential units.
Portfolio Growth Is Masking Slower New Lending
Choucair noted that cumulative real-estate lending by Saudi commercial banks increased 5.3% year over year by the end of the second quarter of 2026 to approximately SAR 980 billion.
At the same time, new residential financing provided by banks to individuals reached roughly SAR 5.9 billion in July, representing only a modest monthly increase and a year-over-year decline of approximately 8.5%.
Samer Choucair said villas continue to account for roughly 63% of new financing, demonstrating that mortgage demand remains heavily concentrated in the higher-priced segment of the housing market.
That creates an important structural issue. While demand remains tilted toward villas, the long-term affordability equation in major Saudi cities may increasingly require greater availability of higher-density apartments and other more accessible housing formats.
For investors, this means headline mortgage growth alone provides an incomplete picture. The composition of housing demand—and the price points at which households can actually obtain financing—will increasingly determine where capital should be deployed.
Interest Rates Are Reshaping Bank Strategy
Choucair said monetary conditions remain one of the decisive variables for the sector, particularly because of the Saudi riyal’s peg to the U.S. dollar and the resulting sensitivity of Saudi monetary conditions to the direction of U.S. interest rates.
Banks are simultaneously attempting to protect net interest margins after years of expanding long-duration, fixed-rate mortgage portfolios.
Al Rajhi Bank, which holds approximately 38% of the Saudi mortgage market, recorded relatively limited net financing growth during the first half compared with stronger expansion in corporate and SME lending.
Choucair said the decision by major banks to reduce their 2026 loan-growth expectations reflects a broader repricing of risk and an increased preference for profitability over balance-sheet expansion, particularly as provisions have risen.
“The market has entered a phase of repricing purchasing power, not simply repricing assets,” Samer Choucair said. “Institutions that treat the recovery as a linear return to mortgage-book growth risk misallocating capital. Banks are increasingly using refinancing and securitization to release balance-sheet capacity before extending new financing under the old economics.”
Refinancing Is Creating a Secondary Mortgage Market
One of the most important structural developments, according to Choucair, is taking place away from the primary mortgage market.
The Saudi Real Estate Refinance Company, or SRC, which is owned by the Public Investment Fund, signed agreements during 2026 to acquire mortgage portfolios from Al Rajhi Bank worth SAR 3 billion and subsequently SAR 5 billion, representing some of the sector’s largest mortgage-recycling transactions.
Samer Choucair said these transactions matter because they provide banks with liquidity while simultaneously helping establish the infrastructure for a functioning secondary mortgage and securitization market.
Instead of mortgages remaining on bank balance sheets until maturity, refinancing allows lenders to recycle capital, potentially originate additional financing, and transfer part of the duration exposure to institutional investors.
Previous estimates from Bloomberg Intelligence have suggested that tens of billions of dollars of legacy mortgages could potentially be transferred to SRC by 2030.
For sovereign wealth funds, pension capital, insurers, and institutional asset managers, that development could gradually create a new class of Saudi fixed-income instruments linked to residential mortgages.
The investment opportunity therefore extends beyond whether Saudi households take out more mortgages. It increasingly includes the financial infrastructure through which those mortgages are funded, transferred, packaged, and ultimately held.
Developers and Banks Are Sharing the Cost of Stimulating Demand
Choucair also pointed to expanding partnerships between property developers and banks.
The market has seen financing offers linked to specific residential projects, including promotional rates for selected customer segments, repayment periods extending as long as 30 years, and fixed financing costs.
These offers do not necessarily represent prevailing market pricing across the entire mortgage sector.
But Samer Choucair said they reveal an important behavioral change: banks and developers are increasingly sharing the cost of stimulating housing demand rather than simply waiting for a broad decline in SAIBOR to restore affordability.
That has implications for both property developers and financial institutions.
Developers capable of combining completed or near-completed inventory with executable financing packages could have an advantage over competitors that depend primarily on rising property prices or generalized credit expansion.
Banks, meanwhile, can increasingly compete through structuring, refinancing, and capital efficiency rather than loan volume alone.
Where Is Capital Likely to Move?
Choucair said an emerging mortgage recovery could reorder capital allocation across four major areas of the Saudi investment landscape.
Bank equities with significant exposure to retail lending and mortgages could benefit, provided credit costs remain controlled and refinancing allows lenders to use their balance sheets more efficiently.
REITs and listed developers with completed or near-completed inventory in high-demand markets such as Riyadh, Jeddah, and Makkah could also attract capital, particularly where housing supply is connected to realistic financing solutions.
A third opportunity lies in fixed-income instruments associated with mortgage refinancing and securitization.
The fourth is private capital targeting non-bank financing platforms, structured credit, and securitization infrastructure.
Samer Choucair said the development of indirect financing funds and true-sale structures illustrates the increasing sophistication of Saudi Arabia’s mortgage-market infrastructure.
He cautioned, however, against interpreting every monthly improvement in mortgage contracts as the beginning of another broad credit boom.
“Institutional capital will reward discipline in selecting the lender and the developer, rather than making a broad bet on the return of real estate,” Choucair said. “The smarter flows will move toward balance sheets capable of securitizing mortgages and releasing regulatory capital.”
Three Risks Could Challenge the Recovery
Choucair identified three major risks to the emerging investment thesis.
The first is the possibility that restrictive U.S. monetary conditions persist longer than expected. Because Saudi financial conditions remain closely connected to U.S. rates, delayed monetary easing could postpone a meaningful recovery in household purchasing power.
The second is property pricing itself. Elevated land and residential prices in Riyadh could absorb part of the benefit generated by lower financing costs. Cheaper credit does not necessarily improve affordability if asset prices rise at the same time.
The third is the continued concentration of demand in villas. If the market does not expand the supply of affordable apartments and higher-density residential products, the mortgage market may struggle to broaden sufficiently across income segments.
Choucair added that banks’ efforts to protect profitability could also constrain credit growth for companies operating throughout the housing supply chain, including contractors, building-material suppliers, and logistics businesses.
On the other hand, Saudi Arabia’s housing program, the Real Estate Development Fund, SRC, and the Capital Market Authority’s development of securitization instruments are collectively creating something increasingly similar to the infrastructure of a mature mortgage market rather than a temporary housing-support program.
Q4 Could Become the Inflection Point
Samer Choucair said the gradual month-on-month improvement in mortgage contracts since June could create an important inflection point during the fourth quarter of 2026 if the trend continues.
Three factors could begin to converge: recycled liquidity returning to bank balance sheets, greater stability in the cost of mortgage financing, and completed residential supply becoming available in areas where genuine demand exists.
Al Rajhi Bank remains central to that process because of the scale of its mortgage portfolio and its ability to recycle those assets through SRC and securitization structures.
Other major Saudi banks are simultaneously recalibrating growth objectives toward more moderate levels while placing greater emphasis on pricing and profitability.
Non-bank finance companies, meanwhile, could continue capturing borrower segments that do not fit the underwriting criteria of the largest banks.
The result may not be another explosive mortgage expansion. Instead, it could produce a more differentiated market in which banks, developers, refinancing institutions, and private credit providers each occupy distinct parts of the housing-finance chain.
From Financing Homeownership to Building a Secondary Market
Samer Choucair concluded that Saudi Arabia’s 2026 mortgage cycle should not be viewed as an explosion in housing demand. It is better understood as the restarting of the credit engine under more institutional conditions.
“Saudi mortgage finance has become a hybrid asset,” Choucair said. “One part is demographically supported consumer credit, while another is becoming infrastructure for the capital markets. Returns will not come from chasing volume growth. They will come from positioning around the bottlenecks: liquidity, securitization, and fixed-rate pricing of residential finance.”
That distinction fundamentally changes the investment thesis.
Institutions waiting for mortgage-growth figures to return to the levels seen in 2023 and 2024 may enter the next cycle too late. Capital positioned earlier in banks capable of recycling mortgage portfolios, refinancing and securitization instruments, and developers able to connect housing inventory with executable financing could capture a quieter but structurally deeper recovery.
For Samer Choucair, that is the central capital-allocation opportunity heading into the final quarter of 2026: Saudi housing finance is evolving from a market primarily designed to finance homeownership into a broader financial ecosystem capable of connecting households, banks, developers, the Public Investment Fund, and institutional capital through an increasingly sophisticated secondary mortgage market.