Saudi Arabia, Jun 21 (Arab News): The introduction of the 2.5 percent annual tax on unused land will result in prices dropping by up to 40 percent outside the country’s main cities, according to experts.

The new tax is also expected to increase investment in the property sector, stabilize the market and see major developments over the next two years, they were quoted as saying by a local publication on Monday.

Mansour Abu Riyash, chairman of the real estate committee at Makkah Chamber of Commerce and Industry, said the tax would see prices drop between 20 and 40 percent over the next two years and then stabilize. It would also boost the market over the next three years. He estimated that 40 percent of land in major cities were not being used, which could result in returns of up to SR30 billion if developed.

Khalid Al-Ghamdi, chairman of the real estate committee at the Jeddah Chamber of Commerce and Industry, said that the fees would boost the sector and bring prices back to normal levels. His JCCI colleague, Awad Al-Dosi, deputy chairman of the valuation committee, said the tax would reduce monopolies and force owners to either develop, sell or pay fees. This would see prices drop by around 30 percent, he said.

Riyad Al-Thaqafi, executive president of Iwan Real Estate Company, said there would be further price drops, more developments, and greater investments into the sector within a year of implementation, according to the report.
Jamil Ghanzawi, head of G.L.L. Company, said the tax would encourage the development of houses needed by the middle class because some owners would want to avoid paying any money to the state. The money that would be collected by the state can be used to build more homes for citizens, he was quoted as saying.