The real estate market in the Saudi capital, Riyadh, has witnessed a radical shift in recent days, as the countdown to price correction and a return to fair equilibrium levels begins. This fundamental change coincides with the Ministry of Municipalities and Housing's announcement of the commencement of the new round of vacant land tax invoices, which have exceeded 60,000. This has created a positive shock to the supply chain, leading to a decline in property prices in prime locations, with some developments experiencing drops of up to 50%.
Context of real estate reforms and Vision 2030
This decline cannot be viewed in isolation from the broader context of economic reforms in the Kingdom. Since the launch of Vision 2030, the government has set a strategic goal of increasing homeownership among citizens to 70%. To achieve this, it was essential to address distortions in the real estate market, most notably the phenomenon of land hoarding, which previously led to unjustified price inflation and a shortage of supply within urban areas. The vacant land tax system is one of the most important regulatory tools aimed at freeing up undeveloped land and incentivizing its owners to either develop it or sell it, thereby increasing the real estate supply and achieving a balance between supply and demand.
North Riyadh: From inflation to correction
In detailing the current situation, two real estate experts explained to Okaz newspaper that the government's corrective measures have succeeded in curbing the irrational price increases, especially in northern Riyadh. Real estate expert Qasim Al-Falih confirmed that the market is experiencing a clear downward trend compared to last year, pointing out that the Al-Khair neighborhood in the north of the capital is a striking example of this correction, where the price per square meter has dropped from 2,200 riyals to approximately 1,100 riyals currently, marking a 50% decrease.
Al-Falih added that the “Al-Aaredh” neighborhood within the urban area also witnessed tangible declines, as some lands were being offered at astronomical prices exceeding 6,000 riyals per meter, while today they are being offered at prices close to half, which reflects the success of the policies in dismantling the price bubble in those areas.
Stability in the East and changing investor behavior
On the other hand, experts pointed out that property prices in eastern Riyadh have remained stable and reasonable for years, avoiding the sharp price increases seen in the north, thus making them less susceptible to strong market corrections. Real estate expert Bandar Al-Dahik confirmed that the package of decisions, including regulating the relationship between landlords and tenants and stimulating supply, has created a healthy investment environment based on actual development rather than speculation.
Expected economic effects
This price correction is expected to stimulate construction and real estate development, with the market shifting towards off-plan sales and affordable housing units. The increased supply of developed land will also positively impact citizens' purchasing power, strengthening the sustainability of the real estate sector as a pillar of the non-oil economy and curbing the monopolistic practices that have plagued the market for many years.
