I recently came across this article in the FT. It’s not referring to the United Kingdom’s housing/land market. Can you guess?
For years, wealthy landowners have sat on prime parcels in (the kingdom’s) cities with a view to profiting from the upward trajectory in land values, averaging 7 per cent a year, according to Mohamed Tomalieh of NCB Capital, rather than dealing with the hassle of development.
The government hopes that a controversial new 2.5 per cent tax on this so-called “white land” will force reluctant owners to put their land banks to use by building units or selling to developers. As much as 40 per cent of the capital…has been identified as liable for the tax, which economists have estimated could raise up to $15bn a year.
Bankers say that some of these deserted parcels of land are now being prepared for development.
…a privately-owned property developer working on 6m sq m of land, with a focus on mid-income housing. “But we are going to need multiple actions, tackling the cumbersome development process and boosting the mortgage market and dealing with the affordability issue — the trick is how to synchronise this all.”
Developers say access to cheaper land and regulatory changes could boost the industry, encouraging more sophisticated master-planned developments
but the housing ministry says (the kingdom) needs 3.3m units in the next 10 years as the population climbs from 31m in 2015 to a projected 37m in 2025. On average, over the past four decades the market has delivered half of that.
Over the past 40 years, (the kingdom) has built on average 150,000 units a year, according to estimates, demand is for 300,000 a year.
“To move from 150,000 units a year to 300,000 units, we need three quick wins,” These wins would be speedier approval, speedier execution and more innovative products, he said.
(The kingdom) needs to double the number of developers, he continued, by luring in foreign companies who want to invest in infrastructure and international contractors who have track records of delivering large projects, such as Chinese firms that deliver 80,000 units a year. But, he said, enticing foreign firms would require changes to market approvals, labour regulations and land incentives.
Over the medium term, public-private partnerships with medium and large-sized developers could deliver up to 80,000 units, he says. Long-term master developments could deliver 300,000 units in 10 years. But today, “it’s a crisis”.
It’s the Kingdom of Saudi Arabia. Hard to imagine the current government introducing a tax on vacant land. Perhaps we could learn something on the operation and effects of the ‘white land’ tax?