White land tax to spur Saudi real estate growth
JLL predict the next white land tax will lead to a fundamental shift in the Saudi real estate market
JLL, a leading real estate and investment consultancy firm in the Middle East region, has said the new white land tax will lead to a fundamental shift in the Saudi real estate market.
Jamil Ghaznawi, country manager, JLL Saudi Arabia, said: "The new law will result in a fundamental change in Saudi Arabia's real estate market and help stimulate further development to address the severe shortage of middle income housing."
While it is too early to predict how the market will react, JLL expects the new law to result in several positive changes.
Ghaznawi said JLL would expect the following as a result:
* Some land owners will bring forward plans and begin development in order to avoid the additional tax burden of holding undeveloped land
* Others will seek to sell sites to other developers which should help reduce land values, which have been soaring over the last few years amounting to 30% to 50% of the development cost
* Lower land values will make development more financially viable and therefore stimulate additional activity
* Revenues from the tax will allow the government to undertake additional housing projects with the Ministry of Housing already announcing a number of major projects targeting the affordable housing sector.
White land tax is defined as empty land designated for residential and commercial use within the urban growth boundaries in cities across the Kingdom, the Saudi Gazette reported.
The tax is set to be imposed in four stages. However, no timing has been stated as yet.