Saudi Crown Prince Mohammed bin Salman has decided to freeze rents in Riyadh for five years. The measure took effect on the 25th (local time), and rents for vacant properties are fixed at the price from the most recent contract.
According to the state-run Saudi Press Agency (SPA), Crown Prince bin Salman implemented the rent freeze to rein in soaring housing costs in the capital, Riyadh. In a speech to the Shura Council, a national advisory body, earlier this month, he called the surge in Riyadh rents "unacceptable" and pledged measures to restore balance in the real estate market and cut expense. Through the rent freeze, the crown prince aims to spur real estate development and provide a range of housing options for citizens and investors.
In fact, Riyadh has recently entered a phase of sharp real estate price increases. According to the British real estate consultancy Knight Frank, rents in Riyadh have risen about 30% to 40% over the past two to three years, with rents in upscale northern neighborhoods soaring 50% to 60% over the same period.
Faisal Durrani, a Middle East and North Africa researcher at Knight Frank, said, "Over the past five years, about 250,000 Saudi nationals have been moving to Riyadh," noting, "With an influx of foreigners on top of that, demand for real estate has surged explosively."
The rise in real estate prices in Riyadh is closely tied to the "Vision 2030" project led by the crown prince. In 2016, the Saudi government proclaimed Saudi Vision 2030 with the goal of reducing dependence on oil and diversifying the economy, launching large-scale development projects centered on the capital, Riyadh. However, as real estate prices overheated excessively, the crown prince's goal of achieving a 70% homeownership rate by 2030 has become realistically difficult to attain.
Sensing a crisis, the Saudi government is also rolling out various policies to resolve supply shortages. For example, the Council of Ministers in April approved amendments to the tax law, expanding the scope of what is known as the White Land Tax Law and sharply raising tax rates on idle plots.
Under the previous law, white land was defined as "idle land for residential or commercial use located within city boundaries," and a flat tax rate of 2.5% was imposed. But under the amendments, white land is broadened to "idle land within city boundaries that can be developed," and the tax rate can be raised to as high as 10%.
Riyadh is currently pushing multiple major urban development projects in parallel, including the creation of a large national park and an entertainment complex with a Formula One (F1) track. With the 2030 Expo (World Expo) and the 2034 FIFA World Cup ahead, expansion work at Riyadh's airport also broke ground in Aug.