The impending implementation of the white land tax on undeveloped properties is causing banks, companies and even the government to sell large parts of their property portfolios, sources have told Arab News.
The fear is that real estate prices will dip by up to 50 percent in the Kingdom, it said.
Sales have gradually increased since the Saudi Cabinet’s announcement of an annual tax of 2.5 percent on undeveloped urban land designated for residential or commercial use.
The tax is being implemented in an effort to address a shortage in housing projects, increase transparency and strengthen the tax system.
It has already resulted in a 25 percent drop in prices, Arab News added.
Academic and member of the Council of Saudi Chambers’ real estate committee Ahmad Bakerman said there was currently great uncertainty in the market.
“It is difficult to determine which organisations and firms are selling their land, apart from the General Organisation for Social Insurance (GOSI),” he said.
He added it was probably not wise for anyone to sell their land in the current climate, which has been characterised by considerable stagnation, too much supply and little demand.
Banks do not own property, but hold mortgages.
When people do not pay their loans the banks are entitled to sell the property.
Those who fail to pay their loans only make up 1.5% of people with mortgages, according to the daily.
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