Introduction: Between Fear and Opportunity When geopolitical crises erupt and war headlines dominate the news, fear takes hold of many investors. Some rush to sell their assets, while others freeze their money in banks, afraid of the unknown. But history tells a very different story about real estate specifically. This article is neither a call for blind risk-taking nor a dismissal of the severity of geopolitical situations. Rather, it is an objective, scientific analysis based on academic studies from prestigious international universities and historical data spanning over 100 years, so we can understand together: What actually happens to real estate during wars? Is it considered a safe haven? And what should the Saudi investor do in 2026? Read this article carefully and make your decisions based on knowledge, not emotion. First: What Does History Say About Real Estate During Wars? The truth that may surprise many is that wars have not historically caused real estate market collapses in countries that were not direct battlefields. In many cases, property prices rose during and after periods of conflict. World War I (1914-1918) During World War I, major industrial cities experienced a boom in housing demand as workers flooded into war factories. Land and property prices rose driven by inflation and increased demand. After the war ended, the real estate market experienced a price surge in the early 1920s due to pent-up demand that accumulated during the war years. World War II (1939-1945) This war provides the clearest example that wars don't necessarily crash real estate markets. According to data from the Federal Reserve Bank of St. Louis, homeownership rates rose from 43% in 1940 to approximately 64% by 1960. A study by the National Bureau of Economic Research (NBER) showed that median asking home prices in 35 American cities rose by approximately 56% between April 1940 and September 1945. The reason? The near-complete halt of new construction during the war, as resources were diverted to the war effort, led to a severe housing shortage. When the war ended, pent-up demand was unleashed, creating a historic real estate boom. The Common Lesson The recurring pattern in history is: supply compression during war paves the way for price increases afterward. Wars slow construction but don't eliminate the need for housing. The result is always a gap between supply and demand that benefits property owners. Second: What Do Academic Studies Say? We don't want to base our decisions on impressions or anecdotes. That's why we've gathered the most prominent peer-reviewed scientific studies that examined the relationship between real estate and crises: Krakow University of Economics Study (Poland) - 2024 This study examined the impact of the Russia-Ukraine war on the real estate market in neighboring Poland. Researchers used a Difference-in-Differences methodology to analyze the impact of refugee flows on prices and rents. Results showed that Polish cities receiving large numbers of refugees experienced notable increases in rents and prices in the short term. Housing demand didn't disappear because of war; it geographically shifted from conflict zones to safer areas. Ruhr University Bochum Study (Germany) - 2024 This study published in the MDPI scientific journal analyzed real estate prices in Damascus during the Syrian war. The results were striking: severely damaged properties lost approximately 75% of their value, and areas surrounding direct conflict zones saw declines of about 50%. However, areas far from fighting maintained their value much better. The lesson here is clear: geographic location is the decisive factor, not the war itself. ScienceDirect International Study - 2025 A comprehensive study analyzing data from 6 countries during the period 1990-2023 using an advanced mathematical model. The main finding: direct real estate (purchasing actual properties, not real estate stocks) provides effective protection against inflation over the long term, whether in periods of stability or crisis. Real estate outperforms stocks and bonds as a hedging tool against energy-related inflation. NBER Study (National Bureau of Economic Research) - Harvard A study titled "The Home Front" analyzed the impact of rent control during World War II. It found that homeownership rates rose by approximately 10 percentage points between 1940 and 1945 alone, representing half of the total increase that occurred during the entire 20th century. This means wars can actually accelerate the shift toward ownership rather than renting. Summary of Studies What these studies agree on is that direct real estate (not real estate stocks) is considered one of the best wealth protection tools during crises, with one fundamental condition: it must be in a geographically safe location away from direct conflict zones. Third: Why Is Real Estate Considered a Safe Haven? To understand why real estate withstands crises, we need to understand its core characteristics that distinguish it from other assets: A Tangible Asset That Doesn't Disappear Unlike stocks or cryptocurrencies that can lose all their value overnight, real estate is a tangible, physical asset. Even in worst-case scenarios, the land exists and the building stands. This tangibility gives investors a sense of security and maintains a fundamental value that never drops to zero. Natural Inflation Protection Wars and crises typically lead to higher inflation. When inflation rises, property prices and rents rise with it. The ScienceDirect study proved that direct real estate provides effective protection against inflation even during crisis periods. In other words: your property's value rises with rising prices, maintaining your purchasing power. The Basic Need for Housing Never Stops People may postpone buying a new car or traveling, but they cannot do without housing. This basic demand sets a floor under property prices even in the worst conditions. Research from the U.S. Department of Housing and Urban Development (HUD) confirms that housing is a basic need that is not abandoned even during economic recessions. Continuous Cash Flow from Rentals Even if sale prices temporarily decline, real estate continues to generate monthly rental income. During crises, rental demand increases because people postpone purchase decisions and prefer to rent. This means investors in rental properties may actually benefit from crises. Fourth: The Saudi Real Estate Market in 2026 - The Numbers Speak Let's talk numbers about the current Saudi real estate market and understand the full picture: High Rental Yields The average gross rental yield in Saudi Arabia stands at 6.84% in Q1 2026 according to Global Property Guide, previously reaching 7.34% in Q3 2025. This yield clearly outperforms major global markets like London and Singapore, which range between only 2% to 4%. In Riyadh specifically, the average rental yield reached 8.89%, and in Jeddah 7.89% according to the STC Real Estate Index report. These are exceptional figures by global standards. Rising Rents In Riyadh, apartment rents rose 19.6% year-on-year to an average of SAR 30,832 annually, while villa rents increased 17.2% to SAR 88,715 according to JLL reports. In Jeddah, apartment rents rose 2.6% to SAR 25,013. Property Prices The median home price in Saudi Arabia in 2026 is approximately SAR 800,000. In North Riyadh neighborhoods like An Narjis and Al Sahafah, prices per square meter reach SAR 11,000, nearly triple what you'd pay in southern districts. The national price index rose by only about 1.3% year-on-year, indicating healthy stability rather than a bubble. Strong Structural Drivers What distinguishes the Saudi market is that growth is structural rather than speculative, supported by strong fundamentals: Vision 2030 and the relocation of regional headquarters for over 600 international companies to Riyadh. Accelerating population growth toward 40 million by 2030. The new foreign ownership law effective January 2026. No income tax on residential rentals. And Saudi economic growth of approximately 4.5% to 5% during 2025. 2026 Forecasts According to reports from Cavendish Maxwell and Colliers International, the Riyadh market is expected to record residential property price growth ranging between 8% and 15% in 2026. Riyadh villas in prime locations are expected to grow annually between 4% and 8%. North Jeddah apartments between 3% and 6%. Areas linked to new transportation projects show above-average performance. Fifth: The Impact of Geopolitical Crises on Real Estate - Understanding the Channels Let's understand how geopolitical crises affect the real estate market. The impact is not direct as some think, but passes through specific economic channels: Channel One: Oil Prices and Inflation Crises in the Gulf region directly affect oil prices. Rising oil prices lead to higher transportation and manufacturing costs, then general inflation. But for Saudi Arabia specifically, higher oil prices also mean increased government revenues and greater capacity to spend on housing projects and infrastructure. Channel Two: Interest Rates and Real Estate Financing If inflation leads to higher interest rates, mortgages become more expensive. This temporarily slows purchases but increases rental demand. Tenants who were planning to buy postpone their decisions, which raises rents and benefits rental property owners. Channel Three: Investor Confidence and Migration During crises, capital flees from unstable areas to safer regions. Studies show that wealthy investors turn to real estate in stable countries as a safe haven. Migrants and refugees also relocate, increasing housing demand in receiving areas. Channel Four: Construction Costs and Supply Chains Wars disrupt construction material supply chains and raise building costs. This slows new projects and reduces supply, which supports existing property prices in the medium and long term. The Important Takeaway All these channels work slowly, not suddenly. Real estate is not like the stock market that swings violently daily. Real estate moves slowly and recovers steadily. This is exactly what makes it a safe haven. Sixth: Rentals During Crises - Why Do They Rise? One of the most important phenomena that recurs in every geopolitical crisis is rising rents. This happens for several converging reasons: Postponing Purchase Decisions During uncertain times, many people prefer renting over buying. Buying is a major long-term decision, while renting gives you greater flexibility. This shift increases rental demand and raises rents. Migration and Population Movement The Krakow University study proved that the influx of Ukrainian refugees into Poland significantly raised rents in major cities. The same applies to any region receiving migration waves due to crises. Additional housing demand inevitably raises rents. Slowing New Supply Rising construction costs and difficulty obtaining materials slow the launch of new projects. This means fewer housing units available on the market, increasing competition for existing ones and raising rents. What Does This Mean for Investors? If you own rental property or are thinking about rental investment, crisis periods may be an opportunity to achieve higher rental returns. The key is choosing the right location in a stable area with genuine demand. Seventh: Selling During Crises - When Is It a Mistake? One of the most common mistakes investors make during crises is panic selling. Let's analyze this decision: The Market Timing Error Historical data shows that the S&P 500 experiences an average decline of only 4.6% following major geopolitical events, then typically recovers within approximately six weeks. Real estate is far more stable than stocks. Trying to time the market by buying and selling based on news usually leads to losses from missing recovery periods. High Transaction Costs In Saudi Arabia, real estate transaction costs range between 5% and 7% of the property value. This means you lose this percentage with every buy and sell transaction. Rushing to sell then buying back later could cost you 10% to 14% of the property value in fees alone. Loss of Rental Income When you sell a rental property out of fear, you're giving up a continuous monthly income source. When you return to buy a similar property after conditions stabilize, you'll likely find it at a higher price. When Is Selling Justified? Selling is logical only if: You urgently need cash liquidity. The property is in an area directly affected by conflict. The property is generating continuous operational losses. You have a much better and confirmed investment opportunity. Otherwise, patience and holding is historically the smarter strategy. Eighth: The Difference Between Property Types During Crises Not all properties are equal in facing crises. Here's an analysis of each type: Residential Property The most resilient and durable. Housing is a basic need that cannot be foregone. Residential rental demand increases during crises. Rental yields remain stable or rise. This is the safest option for conservative investors. Commercial Property More sensitive to crises. Retail shops and offices may be affected by declining economic activity. Restaurants, hotels, and entertainment are most vulnerable. However, the warehousing and logistics sector may grow due to changing supply chains. Agricultural Land Historically, agricultural land has maintained or increased its value during wars. Food security becomes a top priority, and productive land gains additional strategic value. Vacant Land Most vulnerable because it generates no income. During uncertain times, investors prefer productive assets. However, land in strategic locations linked to government projects (metro, new cities) retains its value. Ninth: Golden Tips for Saudi Real Estate Investors in 2026 Tip One: Don't Decide Based on Emotion The biggest mistake investors make is making decisions based on news and feelings. History clearly shows that those who sold at the peak of fear later regretted it. Make your decisions based on numbers and data, not news headlines. Tip Two: Focus on Cash Flow During uncertain times, the smartest real estate investment is one that generates monthly rental income. Don't rely solely on price appreciation. Buy a property whose rent covers its installments and leaves you a surplus. This protects you regardless of changing circumstances. Tip Three: Location, Location, Location Choose locations with genuine, sustainable demand. In Riyadh: northern neighborhoods linked to Vision 2030 projects. In Jeddah: northern coastal areas. In the Eastern Province: areas near new industrial and residential complexes. A good location protects you in any circumstance. Tip Four: Portfolio Diversification Don't put all your money in one property. Distribute your investments between residential rental properties and strategically located land, and keep sufficient cash reserves for emergencies and seizing opportunities. Tip Five: Think Long-Term The best real estate strategy during crises is investing with a time horizon of at least 3 to 5 years. Transaction costs alone require a sufficient holding period to achieve net profit. Most studies show that real estate recovers and exceeds pre-crisis levels within this period. Tip Six: Take Advantage of New Laws The new foreign ownership law of January 2026 will bring new foreign capital to the market. This means increased demand, especially in areas where ownership is permitted. Be proactive and invest in these areas before prices rise. Tip Seven: Don't Ignore Insurance During crises, insuring your properties against risks becomes more important than ever. Make sure your insurance policies cover expected risks and are current. Tenth: The 18-Year Real Estate Cycle - Where Are We Now? One of the most fascinating patterns studied by economists and real estate historians is the 18-year real estate cycle that has repeated with remarkable accuracy throughout American history and often coincides with wars and economic shocks. If this cycle holds true, current data points toward a continued housing expansion through approximately 2026-2028, followed by a potential market peak and correction in the early 2030s. This means the window of opportunity for buying may be now, before reaching the peak. Of course, no economic pattern works with absolute precision. But historical cycles give us a useful framework for understanding where we stand in the market's overall trajectory. Frequently Asked Questions Should I buy property now despite the geopolitical situation? If the property is in a good location at a fair price, achieves suitable rental returns, and you can finance it comfortably, the answer is yes. History shows that waiting for "the perfect time" usually means missing good opportunities. The decision should be based on: Do I like this property? Can I afford its costs? If both answers are yes, that's a good signal to buy. Will Saudi property prices decline due to crises? So far, the Saudi market shows remarkable resilience. National growth of 1.3% indicates stability, not collapse. Riyadh is growing strongly thanks to Vision 2030 projects. Structural demand factors (population growth, global companies, foreign ownership law) strongly support the market. Is renting or buying better at this time? It depends on your financial situation. If you're an investor seeking steady income, buying and renting is an excellent option with yields exceeding 7% in Saudi Arabia. If you're an individual looking for housing, compare the monthly installment cost with the monthly rent. In many Saudi cities, the monthly installment has become higher than rent due to elevated interest rates. What's the best type of property to invest in during crises? Residential apartments for rent in major cities are the safest option. Demand for them is continuous, cash flow is regular, and maintenance costs are lower than villas. Neighborhoods near universities, hospitals, and commercial complexes are best. Is real estate better than gold during wars? Both are safe havens but with different characteristics. Gold is more liquid and can be sold immediately. Real estate provides monthly rental income and outperforms as a long-term inflation hedge according to the ScienceDirect study. The best approach is diversifying between both. How long should I hold property during crises? The recommended minimum is 3 to 5 years. This period is sufficient to absorb transaction costs (5-7%) and benefit from natural price appreciation. Most markets recover from crisis shocks within this period. What is the impact of the new foreign ownership law on the market? The law effective January 2026 allows foreigners to own residential and commercial properties in designated areas. This will attract new foreign capital, especially in Riyadh and Jeddah, supporting demand and prices. Early investment in areas where ownership is permitted may achieve excellent returns. Conclusion History doesn't lie: real estate has never collapsed in any major war outside direct combat zones. On the contrary, its value has increased over the long term every time. Academic studies from prestigious universities confirm that direct real estate is one of the best tools for protecting wealth from inflation during crises. The Saudi market specifically enjoys strong structural drivers: Vision 2030, population growth, high rental yields, and new laws attracting foreign investment. These factors are not affected by short-term geopolitical fluctuations. The golden rule: Don't sell out of fear, and don't buy out of greed. Study the market, choose the right location, focus on cash flow, and think long-term. Knowledge is the most powerful weapon for investors during times of uncertainty. Share this article with everyone you know who's interested in real estate. In times of fear, knowledge is the difference between those who lose and those who win.

Tags: real estate investment, wars and property, Saudi real estate market, inflation and property, geopolitical crises, Saudi rentals, Vision 2030, safe haven, property prices, investor tips