RIYADH — The recent move by Saudi Arabia’s government to exempt property deals from 15% VAT, and instead impose a new 5% tax on transactions, is expected to maintain momentum in the residential mortgage market, outlined JLL’s Q3 KSA real estate market performance report.

In another move expected 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, the government has also scrapped the tax from first-time home-buyers of properties worth up to SR1 million.

“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.

“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,” she added.

The office sector continued to see downward pressure across Saudi Arabia, with Riyadh, the commercial hub, continuing to perform better. That said, the third quarter of 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 GLA to 4.4 million sq m.

The retail market saw mall operators and owners continue to retain their tenants and maintain their quarterly average rental rates through incentives such as rent free periods and temporary discounts. In the short term, it is expected to remain under pressure as more supply enters the market, thus, intensifying competition.

Meanwhile, in light of the agreement between the Tourism Development Fund and local banks to finance SR160 billion of tourism projects, in line with Vision 2030, 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. — SG