Rents down in Jeddah as dependants’ tax causes expats to leave

Landlords voluntarily lowering rents to retain tenants in an unstable market

For the first time in decades, residential rents are declining in Jeddah. The decrease is being linked to a dependants’ tax that was announced in December last year and implemented on July 1.

The dependants’ tax is a fee that has to be paid by the expatriate worker in Saudi Arabia for each of his sponsored dependents, which includes his wife, children, and parents among others. As per the directives of the Ministry of Finance, the fee for each sponsored expatriate is 100 riyals (Dh97.90) for each dependant per month this year, 200 riyals in 2018, and 300 riyals and 400 riyals in 2019 and 2020 respectively.

“An impact on the real estate market is already being felt,” said Dr Ali Al Ghamdi, owner of several commercial and residential properties.

A number of real estate agents Gulf News spoke to in several neighbourhoods here requested anonymity. Almost all of them were of the opinion that the real estate market is unusually stagnant at the moment. They also said that owners of some residential buildings have voluntarily asked them to reduce the rents of their apartments by 5-8 per cent for current occupants and prospective tenants.

Voluntary reduction

According to a report, Jeddah Real Estate Market Overview, released by JLL — Mena, there was a sharp decline in rents for both villas and apartments by 5.7 per cent and 8.3 per cent respectively compared to last year when rents were at a much higher level. The report also said the reason for declining rents was expatriates leaving the country.

A large number of expatriates interviewed also said that the owners of their buildings have reduced their rent without them even requesting it. Umm Areeb, a Saudi national married to a Pakistani, said, “We got a notice from our owner almost three months back that he is reducing our yearly rent by 3,000 riyals.”

Syeda Amina, who lives in the posh neighbourhood of Al Hamra with her family, said that her rent has also been reduced by almost 10 per cent.

Al Ghamdi, who is also an ex-diplomat and a popular columnist, said there will be a sharper decline in rents next year; and if the dependents’ tax policies are not changed or removed in the coming years, residential rents even further.

Vacant apartments are also mushrooming throughout the city with “Apartment for Rent” signs on almost every building.

A real estate agent, who has his office in an affluent neighbourhood, said that despite rents being reduced, very few people have stepped in to inquire about renting an apartment, and even fewer have actually rented.

“The demand for apartments has gone down drastically,” he said.

Cost of goods

will decline

Nadeem Khan, an Indian businessman, said, “Our owner has decreased our rent by six per cent. However, I will still have to send my family back home because the taxes are increasing exorbitantly every year; and despite our rent being reduced, basic commodities have become very expensive.”

Some expatriates said that there are some owners who have not yet decreased the rent for their current occupants, but new tenants that occupy the vacant apartment have to pay lower rent.

“We are paying 25,000 riyals for our two-bedroom apartment, but our new neighbours are paying 21,000 riyals,” said Sabiha Maryam.

Sadiya A Nadeem is a freelance journalist based in Jeddah.