King of Hearts
King Salman's move to tax undeveloped urban land may just give everyone a chance to own their own castle
King Salman has wasted no time in shaking things up in the Saudi government since taking the throne in January.
Salman was expected to focus on economic policies that would create jobs and drive more Saudi nationals into work, while also developing multi-billion dollar infrastructure projects to offset the effect of plunging oil prices on the economy.
He was quick to act, first by announcing plans to boost social and infrastructure spending by an estimated $24bn – part of which included a two month salary bonus to state employees.
In a speech to the nation in early March, Salman vowed to fight corruption, diversify the economy and confront anyone who challenged the stability of the country. He also prioritised the availability of affordable homes – something many Saudis have been wanting for years.
If there was any doubt to Salman’s intentions and the speed at which he would act, that was removed when he issued a royal decree stating that the housing minister be replaced and his duties transferred to the minister of state and member of the Saudi cabinet, Essam bin Saeed.
The first major sign of government action on affordable housing appeared last week when the Saudi cabinet approved plans to tax undeveloped land in urban areas – a bone of contention for authorities for years as large tracts of land have been stored up by investors and then traded for speculative profit rather than developing it. Some analysts suggest that up to 50% of property in Saudi Arabia’s largest centres, including the capital Riyadh and the Red Sea port city of Jeddah, remains undeveloped, chiefly because speculators have driven the price of land through the roof.
Understandably, taxing land is a touchy subject that will affect a number of wealthy property owners in the Kingdom, and it’s not difficult to feel for investors who will now have to stump up for tax, pour money into development projects or cash in their property just as everyone else with prime parcels of city land is doing precisely the same thing. The tenets of supply and demand aren’t terribly attractive when you’re on the wrong end of the maths. But the short term discomfort of a few is far outweighed by the benefit to the many.
The move is, however, being met with a general air of approval by experts. Some have said that simply making land available for Saudis to build their own homes will help the nation’s economy. Retailers who depend on leased property can now look forward to the possibility of owning their own shops. Construction firms can expand, both economically and physically, while developers will be able to move ahead with plans that were otherwise stymied by extraordinary land prices. And there to support it all will be Saudi’s banking industry. The brightest news, however, is that the move will also help the government deliver on the 500,000 affordable homes it promised its citizens four years ago. Progress with the project has been slow, due in part to the price and availability of land - something, it seems, the Saudi government has targeted with this new tax.
If owning your own home is akin to your own castle, who better than a King to help gift it?