SAUDI Arabia’s annual consumer inflation edged up to 2.2 per cent in May, with rental prices emerging as the principal driver behind the increase, reports Arab News.
The uptick was fuelled by an 8.1pc rise in housing rents, including a 7.1pc increase in villa rental prices, according to the latest data released by the General Authority for Statistics (GASTAT).
While inflation across the Middle East and Central Asia shows signs of easing, country-level dynamics remain mixed, with Egypt reporting 16.8pc in May, Jordan at 1.98pc, Saudi Arabia holding steady at 2.2pc, and Dubai’s rate moderating to 2.3pc in April.
In a release, GASTAT stated: “On a monthly basis, the consumer price index remained stable in May 2025, recording a 0.1pc increase compared to April 2025.”
It added: “This was mainly due to a 0.3pc rise in housing, water, electricity, gas, and other fuels section, driven by a 0.4pc increase in actual housing rent prices.”
On a month-to-month basis, the consumer price index recorded only a modest increase, signalling relative price stability. However, key segments such as housing, food and beverages, and personal goods and services contributed to the mild inflationary pressure, partially offset by declines in transportation and household furnishings.
The kingdom’s inflation dynamics in May highlight the ongoing strain in the housing sector, where rising rental costs have been the most significant inflationary force.
The housing, water, electricity, gas, and other fuels category saw a year-on-year increase of 6.8pc, driven primarily by the sharp climb in actual rents.
This sector carries the greatest weight in the consumer basket, representing 25.5pc of the overall index, which significantly increases its impact on the national inflation rate.
GASTAT stated that “rents paid for housing in May 2025 increased by 8.1pc, attributed to a 7.1pc increase in rental prices for villas,” underscoring the persistent demand pressures in the residential rental market.
As urban development and population growth continue, rental affordability may remain a critical issue for policymakers.
The upward trend in rents is being driven by a complex mix of structural and economic factors.
Residential demand in Saudi Arabia’s largest cities, particularly Riyadh and Jeddah, has increased as urban populations grow and Vision 2030 development projects attract investment.
Major initiatives such as NEOM and Jeddah Central are fuelling this trend. At the same time, housing supply has not kept pace, especially in the rental market, despite a pipeline of 3.5 million residential units.
Construction activity remains below the level needed to stabilise prices. Rising costs for building materials and labour have also pushed up developers’ expenses, contributing to higher rents.
These dynamics reflect the Kingdom’s rapid urban development under Vision 2030, which aims for a 70pc homeownership rate and a diversified economy.
However, as mortgage-backed homeownership increases, rental demand remains strong, continuing to perpetuate upward pressure on rents.
In addition to housing, food and beverage prices rose by 1.6pc compared to May 2024, largely driven by a 2.8pc increase in the prices of meat and poultry.
These gains coincide with trends observed in the wholesale sector, where the prices of agricultural and fishery products jumped by 4.4pc over the same period.
Agricultural products alone posted a 6.2pc rise, and fishing products increased by 6.1pc, indicating upstream cost pressures that are gradually being passed on to consumers.
&uuid=(email))