Real estate experts expect the housing bubble to burst soon



RIYADH/JEDDAH: ABDULELAH AL-SHADI, JASSIM ABUZAID & SHARIF M. TAHA

Published — Friday 19 April 2013

Last update 20 April 2013 6:35 am

| نسخة PDF Print News | A A

The royal order related to land grants and construction loans will lead to a reduction in the Kingdom's current exorbitant rents and property prices, a spokesman for the Ministry of Housing was quoted as saying in local media.
Custodian of the Two Holy Mosques King Abdullah has ordered the Ministry of Municipal and Rural Affairs, municipalities and localities, to hand over all developed pieces of land and plots ready for construction to the Ministry of Housing which will, in turn, distribute them to citizens with loans.
Real estate experts say the king’s ruling will see a drop in real estate prices. Some expect a huge decline in rents because the land will be available to citizens within a year.
They believe there has been a real estate bubble in the Kingdom, which will soon be deflated by the government's action to either build houses and provide them to citizens at reduced prices, or provide land and construction loans.
“The market will sooner or later witness a big decline in prices, since the supply is huge, and could in its first stage satisfy a large part of the demand,” said Ibrahim Al-Ubaid, a real estate expert.
“Investors are concerned now. They feel that consumers might turn to government projects because of their quality and easy terms of ownership," he added.
“The next step will see a large number of investors compete for the government projects. I expect there will be alliances in the market by a number of contractors to compete for the projects, especially now that we are looking at huge projects that will require a great many contractors and developers," he said.
Abdullah Ash Shaiqi, of Ash Shaiqi Real Estate Group, said that after the Housing Ministry becomes the sole agency handling housing issues, he expects a gradual decline in property prices, and as soon as the decision to build materializes, prices will go down “instantly” by about 10 percent. “There will be a big difference in prices between the commercial supply on the one hand and the government supply on the other,” he said.
Abdullah Alrobayan, a Saudi columnist, said the Ministry of Housing has no more excuses. “In the past, the ministry used to say that the Ministry of Municipal and Rural Affairs was very slow in handing over land to create housing projects. Now the king has given the Ministry of Housing all the government land and money it needs."
Mohammed Al-Dowsari, a real estate developer, told Arab News that the king’s decision would have an impact on rented apartments in the medium term. He did not want to pre-judge the overall impact on real estate prices. “As we know such decisions will take time until they are implemented and there might be some changes in future,” he said.
Al-Dowsari believes that the Ministry of Housing should not be a regulatory and executive body at the same time. He said that having a real estate commission to regulate and govern the market has now become a necessity.
Saudi citizens will benefit from the royal order in less than one year, which is aimed at providing suitable housing units for them, Mohammed Al-Zumai, the ministry spokesman, said.
Although the Ministry of Housing has finalized the construction of some housing units, it needs to ensure only deserving people receive the homes, he said.
A total of 1.3 million people have applied to the Real Estate Development Fund (REDF), he said.
Al-Zumai said the royal order ensures one ministry is responsible for housing and that citizens are given various options including land, construction loans or housing units.
Others will be given the option of working in partnership with private sector firms, which is crucial for the success of the government's housing program. The ministry has worked out a partnership framework with the private sector in this regard, he said.
Al-Zumai said the ministry has proposed that vacant land be converted into housing at affordable prices. The ministry has also recommended that new land ownership policies be enacted to ensure more land supply that could curb price hikes and manipulation, he said.
The government has already set aside a whopping SR 250 billion to build 500,000 houses across Saudi Arabia. The Housing Ministry will be given a free hand in all matters related to real estate, which will likely create a boom in the construction industry and other ancillary sub-sectors.

What's happening around Saudi Arabia

JOUF: A citizen in Jouf has become at 94 the oldest person to register for the Dec. 12 municipal council elections.The man, who was not named, arrived at the Zaloum election center accompanied by his 62-year-old son, an online publication reported on...
JEDDAH: The spike in cases of the Middle East Respiratory Syndrome (MERS) coronavirus is worrying because of the upcoming annual pilgrimage, according to a top doctor.Hanan Balkhi, head of the Health Ministry’s national scientific committee of infect...
RIYADH: Senior Indian police and intelligence officials interrogated two Saudis after they were detained following their suspicious movement in Trichy, a southern city in India’s Tamil Nadu state. Officials detained the duo — Rasheed and Abdul Rahma...
MADINAH: Defective air conditioning units at Prince Mohammed bin Abdulaziz International Airport (PMIA) have left passengers sweltering amid the excessive afternoon heat. The travelers had to resort to using pieces of paper as fans to cool themselves...
RIYADH: The participation of Saudi women in the upcoming municipal council elections is set to ensure they take their rightful place in boosting social and economic development in the country.Many women have already begun registering as voters, and w...
JEDDAH: Only 7,034 Saudis have so far registered in Riyadh and the Eastern Province for the Dec. 12 municipal council elections, a local publication reported Wednesday.The elections, held for the third time in the Kingdom, are expected to attract a r...
JEDDAH: A total of 66,000 Nigerians will perform Haj this year, according to the National Haj Commission of Nigeria (NAHCON).The first group of 300 pilgrims arrived Sunday, sources at the Nigerian embassy said. “The first flight that took off from th...
RIYADH: The Passports Department has announced that there will be heavy fines for people transporting Haj pilgrims without licenses.There would be fines of up to SR100,000, a two-year-prison sentence and deportation for anyone found harboring or prov...
RIYADH: The Public Education Evaluation Commission (PEEC) head said on Wednesday that private schools will undergo performance evaluation in the next two to three weeks by local specialists who have just finished their training under the organization...
JEDDAH: Saudi Arabia has announced that the country’s citizens are safe in Lebanon, but has joined Kuwait and Bahrain in issuing advisories warning its citizens not to travel there.Saudi Ambassador to Lebanon Ali Asiri said Tuesday that the embassy h...
RIYADH: Assistant Director General for Information and Communications Technology (ICT) at the Ministry of Health (MoH) Mansour Al-Suaidan has been selected by the Kent, Leonard, Adam and Scott (KLAS) as the only Arab advisory board member.“Mansour Al...
JEDDAH: The local Pakistani Journalists Forum (PJF), in cooperation with the Consulate General of Pakistan, celebrated the country’s 69th Independence Day, where children thrilled the audience with patriotic songs.Pakistan Consul General Aftab A. Kho...
JEDDAH: The Specialized Criminal Court in Riyadh has sentenced an Algerian expatriate to 18 months in jail for overstaying his Umrah visa. The court also found evidence that he tried cross the Saudi border to fight in Syria, a local publication repor...
JEDDAH: An official at the Ministry of Labor confirmed that ministry will launch an e-recruitment service via the Musaned website next week. The service will allow employers to apply for visas without the need to visit labor offices.Ahmad Al-Ghamdi,...
RIYADH: A new Saudi program on television called “Security of the Kingdom” will go on air on Tabah Channel starting on the first week of September, according to Dr. Mohsin Shaikh Al-Hassan, the program’s host.“The program is important and timely beca...

Stay Connected

Facebook