Ahmed Bin Hamdan
Okaz/Saudi Gazette
MADINAH — The Cabinet decision to impose tax on unused urban land has brought down real estate prices outside the central area in Madinah by 20 percent, according to real estate brokers.
Speaking to Okaz/Saudi Gazette, they said white land sales accounted for 71 percent of real estate deals in the city valued at more than SR20 billion during the Hijra year 1436, which ended in mid-October.
“This once again emphasizes the need to impose such a tax to transform white land into residential projects in order to resolve the housing problem and bring down rent prices,” said one broker.
He noted the special status of Madinah where many Saudis like to spend their retirement lives. “This has increased real estate prices inside the city due to high demand,” he said.
Realtors in Madinah normally would not react quickly to developments that would usually bring down prices in other parts of the Kingdom.
The Council of Ministers decided to impose a 2.5 percent tax on unused urban land last month. The measure will come into effect only after a year. In the interim period, the Housing Ministry will issue bylaws within six months for enforcing the levy.
Abbas Al-Toukhy, president of Al-Toukhy real estate group, said the decision to impose tax on white land had a big impact on real estate prices in Madinah, especially outside the Haram area, ever since the Council of Economic Affairs announced its study on the issue.
“The prices have gone down by more than 20 percent compared to last year,” he said. “The fall in prices is very clear outside the Haram area. Owners are afraid of the tax and many of them have offered to sell their plots of land and there are no takers,” he explained.
Speaking about prices inside the Haram area, Al-Toukhy said prices have gone up due to big demand. For example, in the area known as Arbaat Adwar the prices have reached SR8,000 per square meter.
“Projects associated with the Prophet Mosque’s expansion have contributed to an increase in the real estate prices within the central area of Madinah,” he pointed out.
Following the Cabinet decision there was stagnation in selling and buying of land in the region, Al-Toukhy said. “Everybody is now waiting for the executive bylaw, which will determine how the tax would be imposed.”
According to Al-Toukhy the land tax would not have a big impact on prices of real estate inside the Haram area. “There is a shortage of residential land in Madinah to accommodate the growing population as many Saudis intend to spend their last years in the holy city. This would make real estate prices inside the Haram area stable,” he added.
Ali Awari, secretary-general of the Madinah Chamber of Commerce and Industry, emphasized the significance of the land tax saying it would encourage real estate owners to carry out more housing projects across the Kingdom.
“This will have a big impact on reducing real estate prices and house rents,” Awari told Okaz/Saudi Gazette. “White land sales accounted for 71 percent of total land deals in Madinah during 1436H with a total value of SR20 billion. This also indicates that there are lots of white land in the region.”
Abdul Rahim Al-Ghazi, marketing manager of Qusur Al-Ghad real estate group, said the market has reacted quickly to the land tax decision, and this was evident ever since the matter was under discussion in the Shoura Council.
“It has reduced prices in residential areas outside Haram, especially in Aziziyah, Shouran, Hamra Al-Assad, Aaqoul and Owaina by more than 20 percent,” he pointed out.
Al-Ghazi said the market is awaiting Ministry of Housing's executive bylaw explaining how the tax would be imposed and on which types of land and whether there would be any exemptions. The market will remain stagnant until the executive bylaw is out, he said.
“You may see a lot of offers to sell land without having enough buyers,” he added.
