RIYADH: Owning a house is a life's dream, but the dream is one thing and the reality is something different for people facing high land pricesAli Al-Zaid, chairman of the Real Estate Committee in Riyadh Chamber of Commerce said skyrocketing prices for residential land plots cannot be justified. He said the rise in the prices puts great pressure on development projects, particularly on housing projects, since land plots are a part of projects' overall costs. He expressed a hope that there will be coordination between the private sector and government agencies to secure land plots at reasonable prices for investors in the housing sector and other projects. Saad Al-Ressais, a member of the Islamic Chamber in Jeddah, said the growing demand for residential units and rapid population growth are causing the price increases. He said the demand for the housing units in the real estate market far exceeds the supply and noted that Riyadh needs 30,000 residential units every year, for the next 10 years. He denied allegations that speculators have had a hand in the skyrocketing prices. “It is impossible for businessmen to speculate in real estate because of the economic principle of supply and demand,” he said. “This principle makes it impossible to manipulate the land trade.” He said the lack of a specialized housing bank responsible for establishing a long-term loan policy and the absence of an authority tasked with real estate affairs have contributed to the problem. He said the Kingdom needs 200,000 more residential units every year and that the growing annual rate of demand has reached 3.7 percent. Fadl Al-Buainain, an economic expert, said investors have driven prices of residential plots to twice their reasonable levels. “There are two main investment portfolios in the Kingdom, the stock exchange and real estate market,” he said. “The money in the two markets has been moving in a very well–studied manner. In 2003 and 2004, the money moved to the stock market when the stocks were low and they then started increasing until 2006. Subsequently, the capital went out of the stock market, to real estate, which has witnessed an unprecedented leap in prices. Al-Buainain, who called this stage a real estate bubble, said increased government spending also led to the rise in housing demand and prices because of recruitment of foreign workers. He suggested that municipalities adopt organizational measures classifying the types of real estate to prevent their being used for reasons other than their intended purposes, which causes price increases. Al-Buainain also called for legislation allowing the collection of Zakat for the unused land. He also said that when land plots are purchased, the purpose, i.e., housing or commercial investment, should be recorded on the title deeds. Engineer Muhammad Al-Quwahis, chairman of the Water and Public Utilities and Services at the Shoura Council, said he believes real estate speculation has driven up the prices and agreed that the trend impacts development and housing projects. He said the Shoura Council is considering the possibility of imposing fees on unused lands inside the urban zones.
