Saudi Arabia exempted property deals in the Kingdom from the 15% Value Added Tax (VAT), earlier this month, and instead impose a new 5% tax on transactions, helping the residential mortgage market gain momentum, according to JLL’s Q3 KSA real estate market performance report.
The Saudi government’s has also exempted the tax from first-time home-buyers of properties worth up to $ 266,655 (SAR1m), in a move to encourage first time home buyers and support the Vision 2030 goal of increasing homeownership to 60% by the end of 2020 and 70% by the end of 2030.
“In addition to the positivity injected by the recent government measures, the residential sector also showed strong construction activity in Q3 2020 with around 10,000 units handed over in Riyadh and Jeddah. This brings the total residential supply to 1.3 million and 834,000 in Riyadh and Jeddah respectively,” said Dana Salbak, head of research for JLL MENA.
Salbalk added: “Looking ahead, residential rental rates in the Kingdom are expected to remain under pressure in the short-to-medium term, namely on the back of wider macroeconomic factors such as the growth in unemployment rates, and consequent contraction in household incomes.”
Meanwhile, the office sector in KSA continued to see downward pressure across, with Riyadh, continuing to perform better.
Q3 2020 saw the highest number of office space deliveries in the year, with four projects added to the office stock in Riyadh, bringing the total supply of office gross leasable area (GLA) to 4.4 million m2.
Saudi Arabia’s retail market witnessed mall operators and owners continue to retain their tenants and maintain their quarterly average rental rates through incentives, including rent-free periods and temporary discounts.
However, the sector is expected to remain under pressure as more supply will enter the market, which will further intensify competition.
Moreover, the Kingdom’s hospitality market is expected to witness improved infrastructure, as well as an increase in the number of hotel rooms and construction activity, following the agreement between the Tourism Development Fund and local banks to finance tourism project worth $42.7bn (SAR160bn), in line with Vision 2030.
JLL: VAT exemption to create momentum for KSA residential mortgage
Published: 24 October 2020 - 8:05 a.m.