Few takers for costly new apartments

New apartments throughout Makkah Province are going unsold as buyers shy away from purchasing new apartments since the beginning of the fourth quarter of 2012, a source from a special committee at JCCI told Al-Eqtisadiah newspaper.
“This reluctance to buy started early in the last quarter of 2012,” the source said, adding that there has been a dip in apartment sales of more than 20 percent. “Four factors contributed to this decline, most prominently the exaggerated high prices that are now over 50 percent more than the fair price.”
The committee noted that there has been a shift in the market as a result of the major role played by the government in real estate development, represented by the Ministry of Housing and the Real Estate Development Fund.
“Demand for old building units and apartments more than 10 years old increased on the part of low-income citizens, and those with middle income and higher, as they have access now to bank financing,” the committee reported, saying that most citizens look for villas with small spaces ranging between SR 1.1 million and SR 1.4 million.
“Real estate appraisers discovered during assessment tours of some apartments that prices are unjustifiably high, as they are 50 percent more than the real value,” said Abdullah bin Said Al-Ahmari, head of the Real Estate Appraisal Committee at the JCCI.
The four factors that Al-Ahmari delineated, in addition to the aforementioned high price of apartments, are consumers’ preference for old units that are more than 10 years old. The lower prices and large spaces are weighed against the poor quality of construction of the new apartments, the pending executive code of financing and mortgage system and the emergence of government housing projects.
“The major players in determining prices of residential units are the Ministry of Housing, the Real Estate Development Fund and government real estate developers,” said Al-Ahmari. He stressed that the three parties confirmed that the price of an apartment of 250 sq. meters should be around SR 500,000.
“But investors started to decrease their margins, with profits of no more than 10 to 15 percent,” he said. “Nonetheless, the sector is still experiencing a contraction pending the new regulations of mortgage and financing.”
Criticizing the absence of an official body to resolve disputes between landlords and tenants, he said: “The Ministry of Commerce bears part of the blame for neglecting the quality control of the project and not demanding a certificate guaranteeing the required quality for 20 years after the time of implementing the project.”
He called on consumers not to be hasty when buying property. It is prudent to consult experienced appraisers and real estate experts, explaining that JCCI launched a series of diploma courses for real estate appraisers to protect the market and consumers alike.
The JCCI program is the first of its kind in the Kingdom. It defines a scientific approach for appraising properties that is prevalent in developed countries, and contributes in curbing exaggerated high prices.