(MENAFN - Arab News) Housing prices in the Kingdom will go down 30 percent due to falling oil prices distribution of more low-cost homes and the imposition of Zakat on vacant land a real estate expert has predicted.
'The real estate market is facing an unprecedented recession and many agents have spoken about falling sales' said Bandar Al-Aboud adding that this would result in prices reaching reasonable levels.
He said commercial banks in the Kingdom have played a role in hiking prices by granting huge amounts to citizens in long-term housing loans. 'This increased liquidity and led to skyrocketing prices.'
He said real estate developers and owners are facing pressure to reduce prices. 'Most developers have been making profits ranging between 30 and 60 percent because they use low-quality construction materials' he said.
Al-Aboud said he believed the new real estate financing law which has been approved by the Saudi Arabian Monetary Agency would solve the country's housing problem.
The government decision to impose Zakat on vacant land inside cities would help bring prices down he said. About 70 percent of plots in Riyadh are in this category with 60 percent in the Eastern Province and 50 percent in Qassim he said.
According to one blogger Khamis Al-Jaary prices of plots in north Jeddah rose from SR20000 to SR200000 per square meter. 'After the real estate collapse it came down to SR30000. But now prices have gone up again to SR500000. It's now time for them to fall again' he said.
Another blogger Abu Walid agreed that real estate prices in Makkah and Jeddah are too high. However he did not agree with Al-Aboud that the market was going through a recession. He hoped that the construction of more low-cost homes by the Housing Ministry across the Kingdom would reduce prices.
Abu Fahd another Saudi blogger said Al-Aboud's statement does not match the reality out in the market. 'In Riyadh the price of a residential flat has gone up from SR500000 to SR1.3 million.' He said sellers are saying they are selling for SR1.35 million. 'This is the reality.'
Abu Fahd said the oil price plunge would have a negative impact on the Kingdom's ability to finance low-cost homes. 'So the ministry will not be able to fulfill its promise due to economic reasons.'