Will expat dependents fees drive rent prices down?

Al-Riyadh

The large number of expatriate workers and their accompanying families who live in the Kingdom and who account for one third of the population have a huge impact on the housing sector in Saudi Arabia. Nobody can deny this impact, which affects the balance of supply and demand in the real estate market. Expatriate workers and their families occupy some 1.4 million of the total 4.6 million homes in the Kingdom.

Property experts have expressed concerns following the recent imposition of fees on the dependents of expats. Most of them believe that the fees will drive down rental prices, as many expatriate workers will opt to send their families home. Once expat families leave on final exit, many rental properties will become empty. Experts predict that once expatriate workers send their families home, they will start searching for cheaper accommodation. As a result, those districts where expatriate workers prefer to live will see a decrease in the cost of renting accommodation.

In my opinion, the decrease is not going to be as dramatic as real estate experts predict. I think there is a bit of exaggeration at work here. When we analyze the expatriate demography in the Kingdom, we find that around 70 percent of expats are single while 30 percent live here with their families. This means that only one third of homes occupied by expatriate workers will be affected by the fees on dependents and potentially become empty. The remaining accommodation will not be affected because most of their occupants are single.

I also believe that the decision to enforce the fees will end the problem many single expatriate workers continue to face. A large number of single expatriate workers tend to live in groups in single rooms because of a shortage of available accommodation in certain neighborhoods. You can find five workers living in a small room and sharing rent. The enforcement of fees will free up accommodation and give single expatriate workers more opportunities to find affordable housing.

As for Saudis looking for low-cost homes, I advise them not to raise their hopes too high. Most homes that will become available are located in districts known to be home to large numbers of single expatriate workers. Most Saudi families who traditionally lived in these areas left years ago in search of better accommodation.