Fees on undeveloped land ‘will reduce house prices by 50%’

The decision by the government to impose fees on large tracts of undeveloped land would slash house prices and ensure citizens have more money in their pockets, said economists and real estate experts. The Cabinet took the decision on Monday, on the recommendation of the Council of Economic and Development Affairs. It is aimed at reducing the hoarding of property by speculators and providing land for the country’s multibillion-riyal housing program. Some observers believe that house prices would fall by up to 50 percent once the government makes it more expensive for owners to hold on to their excess properties, according to a report in a local publication on Tuesday. Economists have called on the government to set up a database of all land in the country to facilitate the imposition of fees, which would be linked to the Ministry of Justice. They estimate that 4 billion square meters of land would be subject to fees. A total of 65 percent of land in the Eastern Province is currently untapped, 60 percent in Riyadh and 70 percent in the western region. According to Abdullah Al-Maghlouth, a member of the Riyadh Chamber of Commerce and Industry’s committee on investments and securities, the decision would make land available to citizens and help the national economy. “The decision is confirmation of the government’s commitment to assist citizens.” He said owners of large tracts of vacant land would be encouraged and pressured to either sell the land or develop houses. The resultant excess supply of land and housing units would in turn drive down prices, said Radn bin Soufaq Al-Duweish, president of Al-Hakamiah Real Estate Development Company. Economist Essam Al-Zamil said this was one of the most significant economic decisions taken by the government in recent times, which was likely to have an impact on all sectors of the economy. “Serious harm is being caused by the current monopoly on land because this not only negatively affects housing prices, but also all economic activity,” he said. Khalid Al-Bawardi, a writer and economic analyst, said the decision would indirectly increase citizens’ income by 30 percent, which would be savings secured from lower land prices and rents. “The reform process appears to be serious, with public interest as the top priority,” he said. Meanwhile, Mohammed Barman Al-Yami, a member of the Eastern Province Chamber of Commerce and Industry’s contractor’s committee, said the government must make sure that property owners cannot find loopholes in the regulations to avoid payment. The Cabinet decision would now be developed into legislation at the Shoura Council, the report stated on Tuesday. -arabnews