Saudi Arabia’s National Transformation Plan, unveiled earlier this year, will play a key role in boosting growth in the property sector through several initiatives, real estate consultancy Knight Frank said in a new report.
One of the development strategies expected to transform the sector is the establishment of a real estate investment trust, which will attract foreign investments into commercial properties such as office buildings, retail centers, and hotels.
The government also plans to a levy a 2.5 percent white land tax annually on undeveloped plots of 10,000 square meters, with the aim of encouraging land owners to develop more homes to the market to tackle the current housing shortage.
The Ministry of Housing has announced plans to create its own property company and offer a mortgage guarantee fund to boost lending, which will also drive growth in the real estate market, Knight Frank said.
“Over the medium-to-long term these development strategies are expected to transform cities for the better, improving the quality of life while maintaining affordability,” said Stefan Burch, head of Knight Frank KSA.
“In the short run, the white land tax on undeveloped land is expected to see land owners review their holdings and portfolios in order to be well positioned in light of the proposed tax,” he added.
Meanwhile, others might look to sell their sites, which should lead to a drop in land values, consequently making development more feasible.
“This in turn is likely to increase development activity across the kingdom,” Burch added.
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