Gross Rental Yield vs Net Rental Yield: The Saudi Cost Stack

Gross rental yield vs net rental yield is one division and one long subtraction, and Saudi Arabia publishes both halves of the division and almost no price for the subtraction. REGA files An Narjis apartments in Riyadh at SAR 403.34 per sqm per year on 4,131 leases against SAR 9,292.09 per sqm on 209 deeds for Q3 2025: 4.34% gross on REGA's published per-metre column, 4.43% on value over area (rent file, sales file). Every deduction under that line has a legal basis in print, and only one of them has a published price. The widest wedge in any Saudi disclosure is not the service charge: Derayah REIT left 23% of FY2025 revenue uncollected, about seven times what it spent operating its buildings (Derayah REIT).

Key figures at a glance

Metric	Value	Scope	As of	Source
Gross yield, both price definitions	4.34% on REGA's published column, 4.43% on value over area	An Narjis apartments, Riyadh	Q3 2025	Omran on REGA
The two legs	SAR 403.34/sqm/yr on 4,131 leases; SAR 9,292.09/sqm on 209 deeds	Same cell	Q3 2025	REGA rent, REGA sales
Service charge price index	+3.442% YoY, 0.0098% of the basket, no level published	KSA national	July 2026	GASTAT
Letting fee cap	2.5% of the first year's rent on a lease	KSA national	Gazetted 22 Jul 2022	Brokerage Law
Vacant-property fee ceiling	A share of fair market rent, capped at 5% of building value	Designated scopes	15 May 2026	Umm Al-Qura
Gross to net, one listed fund	6.294% gross, 5.421% after costs, 2.834% after debt	Derayah REIT, our arithmetic on its printed lines	FY2025	Omran on Derayah REIT

Gross rental yield vs net rental yield, worked on one district

An Narjis is the thickest cell REGA publishes on both legs, and Q3 2025 the last quarter carrying a neighbourhood sale price. Both legs are REGA's. Only the division is ours, and two tests decide whether it was allowed. Product: the rent file implies an average rented apartment of 127.7 sqm, the sales file an average sold one of 129.6 sqm, 1.5% apart. Definition: REGA's per-metre column is a mean of ratios, while the row's own sums give SAR 9,094.46, the convention behind our neighbourhood yield grid. Nine basis points ride on a column nobody names.

Bigger errors sit upstream. Divide this rent by REGA's whole-city Riyadh apartment price for the same quarter (SAR 6,044.07 per sqm, 1,540 deeds across the 89 city apartment rows of that same sales file) and the cell reads 6.67%, 233 basis points manufactured by a wider, cheaper footprint. The district's own published bounds swing the same rent between 3.58% and 5.18%, so the price you negotiate is worth nearly eight times the transaction tax. Only 48 of 185 Riyadh neighbourhoods with a published apartment rent carry a price leg too, and the sales file drops the neighbourhood column after Q3 2025.

What comes off the top, and what the law fixes

Five lines separate gross from net here, and only one carries a published price: the letting fee, capped at 2.5% of the first year's rent by a Brokerage Law gazetted on 22 July 2022 and in force 180 days after that (Umm Al-Qura, Articles 14 and 24). No authority publishes a Saudi residential management rate at all.

Deduction	What the law fixes	Source
Service charge	Compulsory, and no owner may renounce the common parts to escape it (Art 24(3)); apportioned by unit area (Art 26(1)); budget voted annually	Law M/85, regulations, 2020
Letting fee	2.5% of the deal, or of the first year's rent on a lease, unless agreed otherwise in writing	Brokerage Law, Art 14(1), 2022
Tax on rent	Residential leases VAT-exempt, commercial 15%; 5% withholding on rent paid to a non-resident, on the gross	VAT Regs, Art 30; ZATCA, May 2026
Vacancy	Unused six months, continuous or not; a share of fair market rent capped at 5% of building value, read off utility meters; the rate per scope unpublished	Vacant Properties Fees Regulation, 15 May 2026

The 5% transaction tax is the line most often filed in the wrong place: Article 7(1) puts the liability on the transferor, on every disposal since 10 April 2025 (Umm Al-Qura). Amortise it into a buyer's basis, a convention worth labelling as one, and our arithmetic takes An Narjis from 4.341% to 4.134%. On a citizen's first dwelling the State bears the tax on the first SAR 1,000,000, which is relief and not an exemption (ZATCA, Version 6; the tax in detail).

Watching gross turn into net in audited accounts

Listed funds are the only Saudi surface where the walk is printed, and even there the fund prints the lines and never the yield. Derayah REIT booked SAR 100,305,291 of rent on an average valuation of SAR 1,593,724,000 in FY2025 (Annual Report 2025). Walk that down the fund's own expense table and a gross 6.294% becomes 5.421% after SAR 13,909,573 of non-financing cost, then 2.834% after SAR 41,237,026 of financing. Operating and fund costs take 87 basis points, the debt 259. Leverage costs that fund three times what running its buildings costs, and the 23% of revenue it failed to collect is about seven times the SAR 3,468,555 property operating line.

Net is not reliably a haircut off gross, either. Mulkia Gulf Real Estate REIT earned 8.81% of total assets in revenue and spent 10.73% in FY2025, a loss of SAR 28,361,977 (Mulkia REIT). Its Al-Maather building in Riyadh isolates the mechanism, on two numbers the fund prints and one division we do: 9.11% gross on the SAR 219,630,500 valuation it carried at 31 December 2025, against 8.94% on SAR 223,721,000 a year earlier, rent unchanged at SAR 20,000,000. The yield rose because the valuer marked the building down. No Saudi fund publishes a net initial yield. The nearest thing to one is the 7% to 8% capitalisation range Mulkia's own valuers held at 31 December 2025, straight through that impairment (fair-value note). A cap rate is a valuation input, not money anyone collected, which is the line yield on cost against cap rate holds and the one REIT filings let you check.

The two lines with no published level

Neither the service charge nor the vacancy allowance has a published level anywhere in the Kingdom. GASTAT prices the service charge only as a rate of change, +3.442% year on year at July 2026 (GASTAT). Ejar registers contracts and not empty units, so the twelve months of rent a gross yield assumes cannot be verified, and the only public Saudi vacancy figures are single funds: Mulkia's vacant share went from 5.76% at 31 December 2024 to 12.65% at 31 December 2025 (Mulkia REIT). Two fund disclosures are not a market vacancy rate, and nothing here should be read as one.

Omran estimate. What the unpriced lines are worth on the An Narjis cell, from the 4.341% gross (n = 4,131 leases and 209 deeds, Q3 2025). Letting cost at the statutory cap, on an annual re-let: 4.341 x 0.975 = 4.23%, 11 basis points gone. One month of void, stated as an assumption because nobody measures it: x 11/12 = 3.88%. The service charge we convert rather than invent, since it is levied per sqm and comes off the rent per sqm directly: every SAR 100 per sqm per year of charge costs 100 / 9,292.09 = 108 basis points here. A SAR 100 charge therefore nets the cell to 2.80%, one line worth five times the transaction tax and published nowhere in the Kingdom.

One unpublished number outweighs the tax, the letting cap and a month of void combined, which is why a net yield quoted without the building's approved budget behind it is a preference rather than a measurement. Riyadh sharpens that: rents inside the urban boundary are frozen for five years from 25 September 2025 (REGA) while a service charge compounding at July 2026's rate rises 18.4% over the same span. Ask for the underlying table on your district and quarter, or start with the Riyadh districts.

FAQ

What is the difference between gross rental yield and net rental yield? Gross is annual rent over price: SAR 403.34 over SAR 9,292.09 per sqm on An Narjis apartments, 4.34% at Q3 2025. Net is what survives the service charge, vacancy, letting fee, management and tax, and only the letting fee has a published Saudi price.

Is the 5% transaction tax part of my yield calculation? Only through the entry basis, and only if you agreed to bear it: Article 7(1) makes the transferor liable. Amortised in, it takes An Narjis from 4.341% to 4.134%, 21 basis points against the 160 the district's own price bounds already span.

Where do I find the service charge for a building I am buying? Nowhere public. The general assembly approves an annual budget and the charge follows your unit's share of total subdivided area, so ask for that budget and the subdivision document before exchange.

Can I use a "6 to 8% net" rule of thumb? Not from any Saudi publication, because none exists. Those haircuts trace to private brokerage surveys or to UK and Australian landlord guides whose cost stack (council tax, a letting agent's monthly percentage, income tax on rents) does not exist here, and which omit the Saudi lines that do.

Sources

REGA, quarterly rental indicators, Riyadh region Q3 2025, under the KSA Open Data Licence: link
REGA, quarterly sales-transaction indicators, Riyadh Q3 2025: link
MOMRAH, strata Law M/85, Articles 24(3) and 26(1): link
REGA, implementing regulations of that Law, Articles 30 and 34: link
Umm Al-Qura, Real Estate Brokerage Law, Article 14: link
Umm Al-Qura, Real Estate Transaction Tax Law, Articles 2(1) and 7: link
ZATCA, Detailed Guideline for RETT, Version 6, May 2026: link
ZATCA, VAT Implementing Regulations, Article 30 (residential lease exemption): link
ZATCA, General Guideline for Withholding Tax, May 2026: link
Umm Al-Qura, Vacant Properties Fees Implementing Regulation, Articles 6, 7 and 8(5): link
GASTAT, Consumer Price Index tables, July 2026: link
Derayah REIT, Annual Report 2025: link
Mulkia Gulf Real Estate REIT, Annual Report 2025: link
REGA, Riyadh five-year rent freeze, 25 September 2025: link