Real estate businessmen in Jeddah believe that the spiraling trend of house rents will be reversed and rent rates will fall by 40 percent over the next three years.
Rents have been rising at unreasonable rates in the past few years and citizens and expatriates with middle and low incomes have been finding it hard to cope with the situation.
A member of the Real Estate Committee at the Jeddah Chamber of Commerce and Industry (JCCI) Awad Al-Dousi attributed the expected drop in rent rates to a recent change in municipal regulations that allow building owners to construct more stories to their buildings.
Another reason attributed to an expected fall in rental prices is due to a boom in the construction of apartments as a result of the launch of a number of housing projects as well as the construction of many government-funded low cost housing units and the development of underprivileged districts.
“The new projects include a 40,000-house scheme and another 25,000-apartment project called ‘Gulf Suburb’, apart from a number of other housing projects launched by property developing companies,” Al-Dousi said. Apart from this, a large number of rented apartments will be vacated by citizens who are expected to move into privately owned buildings, which are currently under construction and will be completed in the next three years.
Reforms in the labor market will also prevent business cover-up operations that previously took advantage of loopholes in the system that led to a spike in rents.
Al-Dousi dismissed the predictions of some agencies that the Kingdom would need 4 million residential units over the next five years as an exaggeration, citing a statement by Minister of Housing Shuwaish Al-Duwaihi that the country only needs 800,000 during that period.
Meanwhile, Abdullah Al-Ahmari, chairman of the Evaluation Committee at the JCCI, viewed the present astronomical rise in rent rates as ironic, especially given that a number of new residential buildings remain vacant in the city.
“The buildings remain vacant because their owners demand high rents that are beyond the capacity of common people. Subsequently this prompts many people to seek cheap apartments in undeveloped districts with poor utilities,” Al-Ahmari added.
He also agreed with the prediction that the high demand for residential buildings will diminish over the next few years. “It is my strong belief that there will be no single Saudi family living in a rented apartment in 10 years from now,” he said, adding that the rents will fall by 15 percent by the end of the current year.
Abdullah bin Saqar, deputy chairman of the board of directors of Dorchester Real Estate, said all factors indicate that rents will decrease, particularly after the government took proactive measures to rein in the rise in rental prices. In addition, he cited the construction of many residential projects as another reason behind the fall in prices. The minister of housing has said that the low cost housing units constructed by the ministry will be handed over to citizens in the next three years, Saqar added.
The government established the Ministry of Housing under Al-Duwaihi in early 2011 to deal with the acute housing problem and allocated
SR 250 billion for the construction of 500,000 homes at the time.
The result of all these efforts will start showing in the coming years and are expected to end the housing problem for good, housing experts say.