Saudi Arabia’s 2.5 annual tax on unused land will result in prices dropping by up to 40 per cent outside of the kingdom’s main cities, according to experts.
Experts said the new tax is expected to increase investment in the property sector, stabilise the market and see major developments over the next two years, according to a report by Arab News.
Prices are expected to drop between 20 and 40 per cent over the next two years and then stabilise while also boosting the market over the next three years.
Mansour Abu Riyash, chairman of the real estate committee at Makkah Chamber of Commerce and Industry said he estimated that 40 per cent of land in major cities were not being used, which could result in returns of up to SR30 billion if developed.
Another expert, Khalid Al-Ghamdi, chairman of the real estate committee at the Jeddah Chamber of Commerce and Industry said that the fees would boost the sector and bring prices back to normal levels.
The tax is designed to reduce monopolies and force owners to develop, sell or pay fees. Therefore some experts believe this would cause prices to drop by around 30 per cent.
Sales have gradually increased since the Saudi Cabinet's announcement of an annual tax on undeveloped urban land designated for residential or commercial use.
The tax is being implemented in an effort to address a shortage in housing projects, increase transparency and strengthen the tax system.