Real estate reforms ignite debate on the market’s future

Reforms for Riyadh’s real estate crunch have sparked debates among economists, as Bloomberg covers the sweeping real estate reforms the government introduced in the past year for the capital. The reforms include the introduction of a five-year rent freeze to halt the rapid increase in rental costs for both residential and commercial properties and White Land Tax amendments to spur land development.

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Proponents see reforms as vital to boosting housing supply, pointing to early successes, with AstroLabs’ Alex Nicholls noting the five-year rent freeze is already aiding corporate relocations. Meanwhile, Dar Global’s Ziad El Chaar told the business news service that the new land tax is successfully spurring landowners to develop, which is essential for increasing the housing supply.

Others caution that the rent freeze may deter investment. SNB Capital warns that the rent freeze could backfire by hurting developers and REITs. UBS economist Matthias Holzhey was skeptical of direct rent manipulation, calling it “the way to disaster,” arguing it could deter long-term investment and slow new construction. The challenge is compounded by tight liquidity and a widening budget deficit, though it may create openings for private credit funds, private equity, and family offices to step in.