Real estate experts expect the housing bubble to burst soon

Updated 20 April 2013
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Real estate experts expect the housing bubble to burst soon

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.


Saudi Arabia’s King Salman will patronize the launch of the Qiddiya Project

Updated 24 April 2018
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Saudi Arabia’s King Salman will patronize the launch of the Qiddiya Project

JEDDAH: Saudi Arabia’s King Salman will patronize on Wednesday the launch of the “Qiddiya” Project which is the new entertainment, sports and cultural destination in the Kingdom.
The project will be built in Al-Giddiya area, some 40 km west of the capital, Riyadh.
The foundation stone ceremony of will be attended by a host of local and international officials, as well as a number of decision-makers, major investors and representatives of the regional and international companies, marking the launch of the project’s formal infrastructure. The first phase will be completed by 2022.
In a statement to Saudi Press Agency (SPA), Dr. Fahd bin Abdullah Tounsi, Secretary General of the Foundation Council of the Qiddiya Project of the Public Investment Fund (PIF) said that the inauguration of this vital project is a real translation of the aspirations of the Kingdom’s wise leadership and its relentless efforts to develop mega projects that would contribute effectively to achieve many direct and indirect economic returns, and to advance sustainable development for the benefit of the homeland and the citizen, in accordance with the Kingdom’s Vision 2030.
“About two-thirds of the Kingdom’s population is under the age of 35. There is a great need for Qiddiya Project to provide them with entertainment. The project will save about $30 billion, which will be used to develop the domestic economy and create new job opportunities for Saudi youths,” he added.
For his part, Michael Reininger, Chief Executive of Qiddiya, said, “we are delighted to be a key contributor to boost the Kingdom’s economic development and investment, not only for the entertainment industry but also to projects that will develop the capabilities the young Saudi people.”