Direct real estate investments trending toward land development

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claimed to be the Kingdom’s first brokerage firm, says that the real estate development sector index declined by 9.04 percent on the day following the urban land fee enactment.
Sector equities gained 31 percent since the beginning of the year until the middle of the previous month, with a PE ratio of nearly 33 times, AlJazira Capital stated in its latest real estate report.
Accordingly, the company’s research department predicted that the current status of the real estate market along with the current uncertainty may discourage capital investment in the short term, and thus banks and financial institutions will be less willing to bear the risks associated with lending investors and consumers in the short term.
It is possible for certain housing segments to experience declines in prices during 2015, with expectations of a slight decrease in prices in the long run, the report said, adding that the residential real estate recovery will happen when the available liquidity rises and real estate purchasing power increases.
Commenting on the current situation of the real estate market, the report indicated that the market is significantly affected by regulatory reforms, and the decision to impose taxes on urban lands will change the market dynamics and will work to guide direct real estate investment toward the development of lands instead of holding land for capital gains.
Based on the statements from the Ministry of Justice, the report shows that the total number of transactions in residential real estate in major cities declined 33.5 percent during Q2-1436 from the corresponding quarter of the previous year, as well as 15.02 percent decline in the total number of transactions for this quarter compared to last quarter.
The report highlighted a similar decline in the total value of real estate transactions. Accordingly, there was a 38 percent decline in the total value of real estate deals in Q2, 1436 from the same quarter of the previous year and a decline of around 24.38 percent from the previous quarter.
Also, the average price per square meter decreased in the three major cities in Q2, 1436, where the price per square meter declined by 26.88 percent in Riyadh, 25.10 percent in Jeddah, and 19.60 percent in Dammam compared to the same period last year.
Aljazira Capital, the investment arm of Aljazira Bank, is a Saudi joint stock company authorized and regulated by the Saudi Capital Market Authority (CMA). It deals as principal, agent, underwriter, fund manager and arranger, and also undertakes advisory and custodial roles.