Following the adoption on Wednesday of the executive regulations governing fees on vacant properties, the Saudi real estate market is awaiting a new phase aimed at increasing residential and commercial supply by encouraging owners of unused units to put them into use or offer them for rent or sale, in a regulatory move intended to curb hoarding and achieve greater balance between supply and demand in major cities.
The step comes as part of a package of real estate reforms led by the government to enhance the efficiency of real estate assets and improve the housing environment, in line with directives from Crown Prince and Prime Minister Mohammed bin Salman, under the goals of Vision 2030 aimed at building a more sustainable and better regulated real estate market.
On Wednesday, the Ministry of Municipalities and Housing announced the adoption of the executive regulations for fees on vacant properties as a regulatory instrument to be activated when vacancy criteria are met, with the cities and geographic areas subject to implementation to be announced later in accordance with approved standards.
Real Estate Assets
The regulations aim to improve the efficiency of real estate asset utilization, stimulate the use of vacant properties, increase supply, and strengthen balance in the local market. The annual fee on vacant properties was set as a percentage of fair rental value, not exceeding 5 percent of the building’s value.
The fees will be determined within a specific geographic area of a city by ministerial decision, based on indicators including vacancy rates, rising property prices, housing costs, and supply and demand dynamics.
Vacant properties are defined as buildings located within the urban boundary that remain unused for an extended period without acceptable justification, in a manner that affects the availability of sufficient supply in the real estate market.
As for the “vacancy period,” the regulations apply to occupiable buildings within geographic areas subject to implementation if they remain vacant for six months during the reference year, whether continuously or intermittently.
Bringing Units Back Into Circulation
Real estate specialists told Asharq Al-Awsat that the adoption of the executive regulations for vacant property fees represents a qualitative shift in regulating the Saudi market by pushing owners of unused assets to put them into use instead of leaving them closed for long periods.
They noted that the new fees would help bring residential and commercial units back into circulation and improve the efficiency of utilizing real estate inventory, particularly in major cities witnessing growing demand for rentals and housing.
The specialists said the next stage could witness a gradual increase in real estate supply as more owners move toward leasing or selling to avoid annual fees, which would help ease the pace of price increases and achieve a better balance between supply and demand.
They added that the Saudi real estate market is “entering a more mature phase based on operational efficiency and the actual investment of assets, supported by new legislation and ongoing reforms aimed at limiting monopolistic practices and enhancing sustainability in the real estate sector.”
Encouraging Property Owners
Abdul Nasser Al-Abdullatif, chief executive of Raoud Real Estate, told Asharq Al-Awsat that the adoption of the executive regulations for vacant property fees “represents an important regulatory step toward enhancing the efficiency of the real estate market, particularly given the presence of a number of unused residential and commercial units despite growing demand for rentals.”
He said the objective of the fees “is not limited to the financial aspect, but is primarily aimed at encouraging property owners to invest in unused assets and reintroduce them into the market instead of leaving them closed for long periods.”
He expected the regulations to contribute to “increasing rental supply in the coming period, as continued vacancy of units will impose direct financial burdens on owners, pushing a segment of investors to offer their properties for rent or sale, which could gradually help ease pressure on rental prices, particularly in major cities with high demand.”
Identifying Vacancies
Al-Abdullatif said the effects of the decision would not appear immediately “because the real estate market responds gradually to new regulations, in addition to the fact that the extent of the impact will depend on the efficiency of implementation mechanisms, the accuracy of identifying vacant units, and the extent of owners’ compliance with the regulations.”
He added that the Saudi real estate market is moving toward a more mature and better regulated phase, supported by modern legislation, housing programs, and urban transformation initiatives. He expects the coming years to witness greater focus on improving the operational efficiency of real estate assets and maximizing their economic benefit, which would positively contribute to increasing supply and achieving better market balance.
Additional Supply
For his part, real estate specialist Ahmed Omar Basodan told Asharq Al-Awsat that the adoption of the new regulations reflects a clear direction toward improving the efficiency of real estate assets and revitalizing the rental market by injecting more idle supply within urban areas in cities.
Basodan said property owners would come under pressure under the new regulations and would have no option but to lease at reasonable prices appropriate to each area and neighborhood, rather than waiting for higher prices using the same previous approach. He stressed that real estate investment would increasingly move toward utilization rather than hoarding.
He added that the real estate market would gradually add further supply in the coming period and that owners “will reconsider holding vacant properties, which means a balance between supply and demand and lower prices, which is what the government is seeking in the next phase.”
