Riyadh-Agencies
The latest specialized economic report showed that the issue of high land prices continues to frustrate the attempts of private sector developers in the local real estate market, where they find themselves unable to meet the price requirements of the middle and lower segments of society and those wishing to buy homes, and the high financial balance continues to own land as a means of long-term investment, which has greatly inflated the prices of residential land, excluding investment in low-cost residential spaces spread across the Kingdom's vast areas.
The latest specialized economic report showed that the issue of high land prices continues to frustrate the attempts of private sector developers in the local real estate market.
60% do not own homes
It is estimated that 60% of the Kingdom's citizens do not own their own homes, and nearly 10 million citizens live in rented accommodation, according to new statistics from global real estate consultancy CBRE, which focuses on the Kingdom's real estate market.
Mike Williams, senior director of research and consulting at CBRE, said: “There is virtually no regulatory framework to govern land trading, and participants typically do not take into account the actual economic value of land when making their investment decisions. According to CBRE, an additional layer of complexity arises from the current land grant system. Currently, all males over the age of 18 and widowed women are eligible for a residential plot of land regardless of income or economic status, resulting in a large number of undeveloped land because beneficiaries do not have the financial resources to build on their land. The Ministry of Municipal and Rural Affairs has distributed about 2.2 million plots in this way, but there is no data to monitor the actual use of these plots. Williams added: To address this, there are proposals for the government to buy back land that was previously distributed. But if this policy is implemented, people will have enough money to build a house, but not a plot of land.
In addition, the lack of experience and regulatory framework in the Saudi market regarding issues such as freehold and leasehold ownership, and service and maintenance fees for common areas make buying apartments unattractive for most buyers.
Condominiums
The report noted that a large number of unsold low-cost residential units, especially in large-scale community projects south of Riyadh, have been put up for rent after failing to sell enough units, while rental rates have seen some sharp rises in emerging areas that are particularly popular in both Riyadh and Jeddah.
Rising rental rates
According to the latest real estate reports, rental rates in Riyadh rose between 1% and 14% for villas with the steepest rises in the central areas, while growth in apartments was less varied, ranging between 3% and 10%, with the western part of the city coming under the greatest pressure. In Jeddah, the eastern parts of the city saw very little movement (around 1%) in both villas and apartments, while the western areas show rapid growth of up to 20% for apartments and 6% for villas.
The issue of high land prices continues to frustrate private sector developers, who find themselves unable to meet the price requirements of the middle and lower segments of society wishing to buy a property. On the other hand, high net worth Saudis continue to favor land ownership as a long term investment vehicle, thus inflating residential land prices to a large extent, ruling out investment in the low-cost residential spaces scattered across the Kingdom's vast expanses.
