Two reasons why the price of real estate exceeds purchasing power.. Here are the solutions

Member of the Saudi Economic Association, Abdul Hamid Al-Omari, attributed the rise in residential real estate prices to two main reasons, noting that the first of them is the large pumping witnessed by the market in real estate loans during the past three years, which exceeded 390 billion from the year 2019 to 2021.

Al-Omari said: The other reason lies in the weakness of the mechanism for evaluating the prices of land on which the fees system is applied. He made several suggestions if they were applied, prices would return to balance, including calculating white land fees based on the market price per square meter.

This came after the Minister of Housing spoke in a real estate forum the day before yesterday about the fees for white lands, where he indicated that the ministry found that the prices began to exceed the purchasing power of some citizens in Riyadh.

Al-Omari added: Prices exceed purchasing power in most regions, and not only in Riyadh, attributing the matter to two main reasons, the first is the weakness of the mechanism for evaluating land prices on which the fee system is applied, pointing out to this that its receipts are low (2.2 billion riyals only), and the second reason is the large pumping of real estate loans, explaining that Between 2019-2021, it reached 396 billion riyals.

Al-Omari had previously suggested several points, which he considered that if they were implemented, they would reflect positively on prices and contribute to raising the percentage of citizens’ ownership of real estate and fighting forms of monopoly, hoarding and speculation on land, in addition to reducing the massive inflation in prices and the cost of home ownership and reducing the amount of funding needed for it.

And he added: It was hoped to benefit from the lands included in Phase 1 of the land fees, but what was developed did not exceed 3.2% over 5 years. Assuming 80% of them were allocated to villas and 20% to apartments, they would produce 1.74 million housing units.

He continued: The first proposal is that the mechanism for evaluating the prices of raw lands was very weak, as the evaluation of the price of the land is based on a number of determinants to produce a price that has nothing to do with market prices (you may find land with a price of 1000 riyals/meter, while the evaluation says 50 to 100 riyals/ meter), and the fee is calculated based on the lower valuation price.

A member of the Saudi Economic Association said: Accordingly, the fee to be paid will be between 1.25 to 2.5 million riyals, which is not compared with the fee to be paid if the current price of the land (1000 riyals / meter) was adopted as the average market assessment, which would have reached 25 million riyals, which is What would have affected the arithmetic for the owner to develop his land.

He added: The second proposal is to work on facilitating the procedures for land owners’ requests and obtaining the necessary licenses for development as soon as possible, and facilitating their access to real estate financing necessary for development, construction and building (at least as quickly as the buyer obtains financing for purchase), which is what a number of land owners complained of late

He went on to say: The third proposal is to push for the implementation of phases 2 and then 3 within less than 3 years to come, and to rely on evaluating the prices of land covered by fees to evaluate the licensed authorities according to the current market prices at the time of evaluation.

He continued by saying: The fourth proposal is to transfer the collection of land fees from taxpayers to the Zakat, Tax and Customs Authority, for more effective collection, an increase in the efficiency of the land fees system, allocating the bulk of the proceeds to finance development, construction and building, and financing the real estate loan support account for individual beneficiaries. .

Al-Omari added: The first phase of land fees focused on (Riyadh, Jeddah, Makkah Al-Mukarramah, Dammam), which are the most densely populated cities, with the pumping of more than 1.74 million new housing units in just 5 years, as the most important fruits of real estate market reforms with effective implementation. for land fees, and to expedite the implementation of the rest of the stages; All of this would have contributed to solving the housing problem.

The second phase of white lands fees was implemented in the city of Riyadh, where the ministry stated that the fees collected amounted to more than two billion riyals.

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