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JEDDAH: There has been a slowdown in real estate transactions in Jeddah despite a number of factors expected to spur the growth of this vital sector.

According to some realtors, the volume of transactions recorded a fall of about 30 percent at present compared to the same period last year. This fall is mainly attributed to a correction taking place in the market after having witnessed exorbitant increases in the prices of real estate and properties over the past few years, according to a report in Al-Eqtisadiah business daily.

The slowdown came at a time when the construction of housing units received an impetus following the recent approval of low-cost housing projects by Custodian of the Two Holy Mosques King Abdullah, and after scrapping the conditions of owning plots of land to get housing loans from the Real Estate Development Fund. 

Speaking to the newspaper, a number of realtors in Jeddah noted that a huge increase in the prices of housing units over the past few years virtually weakened the purchasing capacity of consumers. They called the current phase of the real estate sector a “corrective” one. “The prices of real estate have shot up immensely and unjustifiably. In addition, investors took an adamant position, as it was a golden opportunity for them to earn huge profits. They were unwilling to make any concessions in the prices. This produced a negative impact on real estate transactions,” one of the realtors said, while adding that this eventually resulted in a correction in the market. He believed that this correction would be more visible in the near future and thus be instrumental in moderating the real estate prices to a justifiable level. Such a situation, he expected, would enable all people to possess their own houses, especially in the wake of a series of royal decrees issued in March this year.

Muhammad Abdul Jabbar, a prominent realtor, attributed the current slowdown in the real estate market to two major factors. One was that people were still waiting to have a clear picture of the low-cost housing projects. The second factor was that owners and investors of real estate’s were still reluctant to reduce prices.

Abdul Jabbar noted that there had been a huge flow of money into the real estate and construction sector in the Kingdom. “This was the result of a number of factors such as the development boom witnessed in the Kingdom, the government’s keenness in supporting the sector, and its efforts to make housing units available for all citizens, in addition to increased liquidity in the real estate sector. Despite all this, the sector is witnessing a slowdown in Jeddah,” he said, while attributing this mainly to the greed of investors trying to cash in on the real estate boom.

Referring to the unreasonable hike in real estate prices, Abdul Jabbar said that a citizen had to pay more than SR700,000 for a four-room housing unit under the lease-to-own scheme. “There has also been an exorbitant increase in the prices of apartments, especially in north Jeddah,” he said, while saying that the current slowdown would help achieve a balance between demand and supply.

On his part, Muhammad Khoja, another real estate investor, said the lack of rules and regulations to govern the real estate market as well as the absence of a mechanism to get a clear picture of the market conditions had produced a negative impact on the market. “The absence of a market index has resulted in rumors being spread among both investors and citizens. Investors deliberately spread rumors about an increase in real estate prices as well as in their business activities in a particular area of the city. This resulted in a further increase in prices irrespective of the demand. On the other hand, they also targeted citizens with rumors about a fall in the prices of real estate they own.”

Khoja noted the exorbitant increase in prices of housing units, especially villas, under the lease-to-own scheme. He spoke of an increase of 25 percent since March. “The investors are trying their best to increase their margin of profit to almost double,” he said, while rejecting investors’ claims that the rise was mainly because of an increase in the prices of construction materials. “Their claims are unconvincing. They have raised prices of residential units well before the recent increase in prices of some building materials,” he added.

By ARAB NEWS

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