Although the global economic crisis has led to a significant drop in real estate prices worldwide, the real estate market in the Kingdom seems to have taken no notice, as rents continue to go up here while they are falling in the rest of the world. There is no single reason justifying these rent increases since the price of building materials, especially reinforced rods, cement and timber have been stable for a long time. Some rental properties, moreover, were built more than a decade ago when the price of building materials was low. All of which makes one wonder what possible justification there can be for increased rents and, furthermore, why the Saudi real estate market seems to contradict all the laws of economics, especially those relating to supply and demand. The wave of rental increases has created panic among some tenants as they come to realize that nothing protects them from the greed of their landlords who contractually have a free hand to increase the rent at anytime. Rental increases have also severely affected young people who are looking forward to getting married and starting a family. These youth are just beginning their adult lives, and rents that they cannot afford end up encouraging them to put off the idea of marriage or of giving it up all together, which of course has negative implications for society. Apartment rents vary from one district to another in Jeddah with the average rent of a four-room apartment being SR22,000. This, however, increases in northern Jeddah where a five-room apartment rents for SR35,000 a year. Furthermore, rents in the less developed areas of the city have all increased by 30 percent regardless of the locations of the buildings. Many tenants can no longer afford these rents, especially those in the limited income group, who are rather sarcastically described by some people as the “hand to mouth group”. Ahmed Saeed Al-Ghamdi, a young man in his 20s, graduated from university two years ago and found a job as a computer engineer at a salary of SR4,500. He said that after working for two years he wanted to get engaged but decided to postpone the idea for several years, pointing out that one of the main factors that discouraged him was the high rents of apartments. Another young man, Ali Muhammed Ibrahim, spoke frankly about the problems faced by youth in Saudi society, saying: “You ask us to do many things, but you don't support us or stand by our side. You never take into account that we are a young generation at the beginning of our lives and careers. You always create obstacles and put hurdles in our way. We have big dreams, but the high cost of living dashes our dreams. It frustrates our dreams. We are not financially capable of buying anything in cash. Thus we buy all things on installment. This, however, leads us to being crippled by debts and burdened with loans. How can we then ever realize our dreams and ambitions?” Khaled Ahmad Al-Qarni, aged 25, said, “It will be at least five years before I can marry. My father died 18 months ago and my salary is only SR6,000. I cannot afford to rent an apartment for my family to live in. This is why young people lead a hectic life trying to make ends meet and satisfy the essential needs of their families.” He said that this hectic life has caused many young people to forget about themselves as they try to provide the basic requirements for their families, adding, “Marriage is a natural instinct but the high cost of living makes it impossible for many youth. Buying a car has become a dream, helping your family has become a dream. Everything has become a dream. It seems that we will keep dreaming for the rest of our lives. I am sure that no young man can afford to pay rent of SR15,000 for a small apartment, and thus marriage becomes a postponed dream.” Khozam project Ismail Mahdi, a man in his mid 50s, said, “I live with my large family in a five-room apartment in an undeveloped district at Al-Nozla Al-Yamanyia, and I have paid a monthly rent of SR1,000 for more than 10 years. But what really worries me is that all the buildings in this area will be demolished since the entire area will be developed under the Khozam Development Project. I think day and night about the fate of my family for I cannot afford to pay more than SR 1,000 a month in rent, and I know that I will not be able to find an apartment for that price anywhere in the city. I cannot pay more as I mainly depend on my pension which is only SR4,000 a month.” Some solutions Dr. Habeeb Turkistani, a professor of economics at King Abdul Aziz University, attributes the increase in rents to the economic boom being witnessed by the Kingdom as was the case in the 70s. He said that at that time the government granted citizens real estate loans to enable them to build residential units which effectively helped in keeping rents under control. “But nowadays,” he said, “the government needs to control the situation by making plots of land available to limited income citizens besides providing them with building materials at concessionary prices. The setting up of a joint real estate company or companies to enter the market so as to support and finance the economic real estate projects will also solve the problem.” He said the solution of the problem also lies in building about 1.5 million residential units as soon as possible, pointing out that if all of these suggestions are implemented, it will put an end to the problem of high rents permanently, but at the same time, warning that a delay in the execution of these proposals will have grave consequences. Esam Khalifa, a member of the Saudi Economic Society, describes the issue of high rents as ‘worrisome', pointing out that turning a blind eye to the problem can have negative social and economic implications which may develop into a crisis. He believes that the increase in rents stems from the Kingdom's high birth rate as compared to other countries and the large number of young people of a marriageable age. Other factors, he suggests, are the large number of non-Saudi residents and the migration of Saudis from villages to towns. He said some studies show that 60 percent of the Kingdom's population are tenants, and thus, he added, landlords have been exploiting the gap between supply and demand using the freedom of the real estate law as a pretext to increase rents by 20-40 percent. He said what has aggravated the problem further is the absence of legislation by the Shoura Council and Cabinet clearly defining the relationship between the tenant and landlord, pointing out that this is a cause of great worry for tenants especially those in the limited income group. He suggests that the concerned authorities should modify the construction regulations and allow citizens to build multistory buildings which would provide an effective solution to the problem. Engineer Ali Al-Zaid, a member of the Shoura Council, highlighted the need for the construction of residential units for different segments of society, especially for the limited income group, in order to solve the problem of continual rent increases which has developed into a phenomenon, which may have a negative impact on the nation's youth. Saleh Al-Hussaini, head of the Economy and Energy committee at the Shoura Council, said many steps needed to be taken in order to find a solution to the problem of rent increases. He called for the issuing of a mortgage law covering popular housing, establishing a housing commission, injecting a large amount of capital into the Real Estate Bank and making all efforts to reduce the price of building materials.
