The Ministry of Housing has initiated discussions with real estate experts in the Kingdom to work out a rent policy which would protect the interest of both the landlords and the tenants by reining in the spiraling rents and bridging the gap between demand and supply in the housing sector.

Speaking to Arab News, Abdullah Al-Ahmari, chairman of the real estate evaluation committee at the Jeddah Chamber for Commerce and Industry (JCCI) said: “The new mechanism to control rentals in the Kingdom will be based on specialists’ evaluation of property values and the rent such housing units should fetch.”

The construction of smaller two-room apartments targeting the expat community has been the bane of the housing sector, he said, pointing out that this practice had resulted in shortage of proper four room apartments for Saudi families. “The gap between demand and supply and the consequent high rentals can be expected to last another five years by which time the Ministry of Housing would have achieved its project target of increasing supply of housing units in the Kingdom substantially to take care of the demand side. And this will result in stability in the housing sector,” Al-Ahmari said.

“Under the new mechanism, landlords will be issued licenses to let out their housing units after the rents are fixed based on their real estate value. The robust and attractive investment climate in Saudi Arabia, the Kingdom’s standing as a safe market and the large gap in demand and supply has led to the healthy growth of the real estate sector,” he said.

Rents have been spiraling out of control in the past three years which has become a major concern for Saudi families who are used to living in four room flats. However, realtors have of late shifted focus to smaller two-room flats which fetch annual rents of over SR35,000 and are most sought after by expats in the Kingdom.

Many Saudis and some expats too have been complaining about new housing buildings coming up in Jeddah with small flats which are being rented out at high annual rent. This has caused a major gap between demand and supply of proper four-room apartments. There is also the practice of landlords demanding an increase in annual rents from existing families, and if they are not in a position to comply, there are asked to vacate.

According to an expert in the realty sector, just the percentage of increase in annual rentals is in excess of a whopping SR500 million.

“I have been looking for a four-room flat at a decent annual rental price for the past seven months. I was surprised to find that most flats were two room affairs with a little extra space with annual rents upward of SR30,000. Most four-room housing units come at SR50,000 a year,” Ibrahim Mohammed, a Yemeni resident in Jeddah, told Arab News.

The landlord of a new building in Al-Rawdah district told Arab News: “Many expats who left behind their families in their countries are only interested in small two-room flats. Even couples without children prefer to rent such flats.”