Warning to landowners welcomed

Experts in the real estate field have welcomed the warning by the Ministry of Housing to landowners to either build or sell their vacant land plots to avoid government expropriation of properties. Landowners, however, are finding it difficult to develop their vacant plots.
“Land prices have reached sky high in Saudi Arabia because of higher demand for rent, which reflects the price of buildings and everything related to it,” said Fadel Al-Buainain, a banking and economic expert.
Al-Buainain added that the new ministry must work hard to develop land in the Kingdom by transferring plots from the government sector to the private sector and the people, which will support the availability of land and force prices down.
“In my opinion, the ministry should acquire more land from the government and ministries. If they develop it early, it will reflect on the prices in the market.”
Al-Buainain said that approximately 60 percent of Saudis are homeowners.
“We understand that there has been some discussion about tax on undeveloped lands,” said John Harris, co-head at Jones Lang Lasalle, a global real estate services firm in Riyadh.
“Of course, in most of the world, property owners and occupiers pay real estate taxes and we would encourage authorities to consider this as a source of funding for the municipal government in Saudi Arabia.”
Harris, however, said that what is unusual is the proposal to target undeveloped plots. “Land is a complex asset class and its supply and value is influenced by diverse factors such as demographics, infrastructure, monetary policy, planning regulations, among others. This kind of targeted tax will likely have unintended consequences and be subject to evasion.”
“In any case, it is unlikely that landowners will develop affordable housing because there is little profit in such activity. We would prefer to see more market-based solutions to the housing challenge, such as new mortgage laws,” said Harris.