The oil-dependent Saudi economy has ground to a near standstill since crude prices collapsed in 2014. Little wonder that gloom in the property sector has reflected this broader slowdown in an economy that has yet to achieve significant diversification.
Research by consultancy JLL shows rents and sales prices of villas and apartments in the capital Riyadh have been falling by 3 per cent on an annualised basis, continuing their slide since oil prices collapsed in 2014. In the Red Sea port of Jeddah, rates for new office rental deals struck in the second quarter were down by 9 per cent year-on-year, the consultancy says. JLL expects further declines over the next year.
New regulations also loom over the market, such as the introduction in July of levies on expatriate workers and dependents that could encourage the departure of many. The expat levies are initially set at 100 Saudi riyals ($26) a month per dependent. They will incrementally increase over the next three years and are predicted to generate around $700m in government revenue in their first year.
The system of levies that favours Saudi workers over foreigners is one of many radical reforms intended to bolster state finances and prepare nationals for a world beyond oil.
But Saudi Arabia’s attempts to reduce its fiscal deficit have weakened growth across an economy that is traditionally reliant on government spending. In particular, the squeeze threatens the government’s ability to deliver 1.5m new units to Saudis on the government waiting list.
Source Credit: Financial Times
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