“Safe as houses” is a phrase that supports the idea that investments in real estate are without peril. Giving the crash in housing prices in the US starting around 2008, quickly followed by similar crises in Europe, many learned to their sorrow that “safe” is a relative term.
Arab News reports that the high prices of housing in Saudi Arabia are due for a bruising, as well. The announcement by King Abdullah that more land would be made available for housing is threatening to burst this particular bubble.
Real estate experts expect the housing bubble to burst soon
RIYADH/JEDDAH: ABDULELAH AL-SHADI, JASSIM ABUZAID
& SHARIF M. TAHA
The royal order related to land grants and construction loans will lead to a reduction in the Kingdom’s current exorbitant rents and property prices, a spokesman for the Ministry of Housing was quoted as saying in local media.
Custodian of the Two Holy Mosques King Abdullah has ordered the Ministry of Municipal and Rural Affairs, municipalities and localities, to hand over all developed pieces of land and plots ready for construction to the Ministry of Housing which will, in turn, distribute them to citizens with loans.
Real estate experts say the king’s ruling will see a drop in real estate prices. Some expect a huge decline in rents because the land will be available to citizens within a year.
They believe there has been a real estate bubble in the Kingdom, which will soon be deflated by the government’s action to either build houses and provide them to citizens at reduced prices, or provide land and construction loans.
“The market will sooner or later witness a big decline in prices, since the supply is huge, and could in its first stage satisfy a large part of the demand,” said Ibrahim Al-Ubaid, a real estate expert.