Saudi houing market: pros vs. cons
According to the statistics that have been conducted in 2013 Saudi Arabia is a country of approximately 18 million citizens with a land area of about 1.96 million square kilometers (756,981 square miles). It has the second largest oil reserves, and the world’s biggest crude exporter, and also expects to become the top producer of refined products such as fuel and petrochemicals, so what’s the problem? Why can’t almost 60 percent of the Saudi citizens own their own houses given the fact that Saudi Arabia is a big country in the Arabian Gulf?
The land prices in Saudi Arabia’s main cities have jumped 50 percent in the last few years due to the absence of property tax, which have made the land owners keep their lands as a long term investment, whom the government nor the market can force them, owners of what are known as ‘white lands’ to lower their prices. The wealthy families who have acquired these lands have a little need to raise cash, so they are not hesitant about selling the lands they own less than the prices they have set which is extremely difficult for most Saudis to afford.
Yet for every cloud there is a silver lining and our silver lining in this dark cloud is the recent orders issued by Custodian of the Two Holy Mosques King Abdullah addressing the housing crisis in Saudi Arabia, by providing for each Saudi citizen a land with a loan to be paid back according to the Islamic teachings — with no interest — but the problem still stands; how can we afford to give to almost 8 million Saudis urban lands while the majority of these lands are owned by business men who are not willing to sell unless the prices of these lands have met their pricing standards?
Which are approximately 500 percent more than their true value. After many attempts to solving this problem that has become a true obstacle standing in the way of success of the Ministry of Housing’s plan; the Minister of Housing, Shuwaish Al-Dhwaihi, had recently announced the start of a ‘build or sell your land’ campaign which is as he said will give the owners of the white lands a chance to either build it or pay property tax if you desire for it to remain in its current state, this will forcefully drop the land prices tremendously, because the land owners will be forced to sell their lands to avoid the property tax, and in their current prices these lands will not find a buyer to take , so the landowners will drop their pricing till it meets the affordable range for these buyers, and that is the scenario the Ministry of Housing is aiming to implement.