May 24 2013
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Real estate boycott launched in Saudi Arabia
Saudi activists have launched a boycott campaign entitled "Do not buy" in retaliation against the high prices of land and the difficulties faced by citizens in purchasing houses. The average Saudi citizen cannot afford to buy a house, asserted Fadhel Al-Buainain, a local economist, pointing out that the salaries of the middle-income segment of the Saudi society do not exceed SR 6,000, which means owning a house or flat is beyond the means of the majority of the population. The economist indicated that small apartments in one of the major cities in the Kingdom costs around SR 648,000, which means a Saudi employee will have to save his salary for more than 30 years before being able to afford a house.
Al-Buainain sited four main reasons inhibiting Saudi employees from owning houses and these are: weak solvency, inflated prices of houses, lack of facilitated financing loans and finally poor planning on behalf of the officials in the public housing sector, who did not study and adequately anticipate the demand on housing, coupled with the demographic expansion. "This campaign is to decry the malfunction in the real estate sector. Sooner or later, the sky-rocketing prices will affect developers and real-estate agents as well," added Al-Buainain. Regarding solutions to the problem, Al-Buainain proposed reducing the prices by accomplishing one of three recommendations.
The first suggestion offered is to intervene in the supply and demand process, or alternatively decreasing demand by reducing government expenditure and the last option is lowering returns on real estate investments. He cautioned, however, that intervening in the supply and demand cycle could have ramifications unless it is coupled with sound planning. The other solution involves enacting regulations that constrain the movement of trade in properties and the exploitation of undeveloped land as investment assets.
The economist also explained that by providing adequate financing support to land owners, the government would stimulate the development of property, thereby expanding supply and reducing prices subsequently. Benefiting from the experience of other countries in the West and Asia would enable local decision-makers to learn from their mistakes and adopt suitable policies, he concluded.
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