Property deal tax, first-time home buyer support expected to push down rents: Jadwa

Jadwa Investment expects that the rentals for housing category will continue to decline further, following the introduction of the 5% real estate transaction tax and the Kingdom’s decision to bear the 5% transaction tax for first-time buyers purchasing a property up to SAR 1 million.

The two decisions are expected to raise the level of home ownership among citizens, in turn, pushing rental rates downwards, the firm said in a recent report.

In addition, the higher supply of affordable housing under the Ministry of Housing’s Sakani program also encourages citizens to switch from renting to becoming homeowners.

In fact, the Sakani program still has around 24% of the total housing units to deliver in 2020, the report said, adding that the decline in the number of expats and dependents will result in lower demand for rental properties.

According to the data available with Argaam, King Salman recently issued a royal order that includes exempting real estate supplies from value-added tax (VAT) and imposing a real estate disposal tax of 5%, in addition to the state bearing the real estate disposal tax for a citizen’s first residence for a maximum of SAR 1 million.