Saudi Arabia: Overview
In Depth
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- Tax on Rent (Example)
- Buying Guide
- Inheritance
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- Rental Income Tax
- Capital Gains Tax
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Oil fuels Saudi real estate market boom
The Kingdom of Saudi Arabia is in the midst of a property boom. Riyadh, the capital and Mecca, the most sacred city in Islam, have experienced the highest house price increases.
The huge oil revenues from skyrocketing oil and petroleum prices in the global market contributed to the rise in purchasing power of Saudis. Several Saudis preferred to buy than to rent real properties.
The rise in income of Saudis coupled with the sharp population growth caused a surge in demand for housing units. These triggered hikes in real estate prices over the past years. In the first half of 2008, several analysts estimated that property prices in Riyadh rose 40% - 90% from a year earlier.
Investments from neighboring Gulf States and liberalization of real property laws added to the boom in Saudi’s real estate market.
A 2000 Real Estate Law allowed legally-resident non-Saudis to own real estate for their private residence, provided they get a license from the Ministry of Interior. The law also allows real estate ownership by foreign investors in order to conduct their business activities, and for the accommodation of their employees, with permission from the Ministry of Interior. To prevent speculation, five years must elapse before property can be sold.
However, real property ownership by foreigners is forbidden in the holy cities of Mecca and Medina. Non-Saudi Muslims can only obtain leases of up to two years in these cities. Leases are renewable for the same period.
RENTAL YIELDS
High yields at 8% - 9%
The kingdom has relatively high rental yields. Overall rental yields ranges from 8% to 9%, according to National Commercial Bank Capital, the largest bank in the Middle East.
Rental yields in Riyadh’s prime housing locations, adjacent to the central business district (CBD) vary from 6% to 9.5%.
TAXES AND COSTS
Last Updated: Nov 27, 2008
Income tax is low in Saudi Arabia
Effective Tax Rate on Rental Income |
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| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | nil | nil | nil |
| Click here to see a worked example | |||
Source: |
Disclaimer | ||
Rental Income: Rental income is taxed at a flat rate of 5%.
Capital Gains: No tax is levied on capital gains realized by individuals from selling property.
Inheritance: As in most countries in the Arab world, Shariah law applies to inheritance.
Residents: Individuals are only taxed on their business income in Saudi Arabia.
BUYING GUIDE
Last Updated: Aug 01, 2006
Total transaction costs in Saudi Arabia
Foreigners are allowed to own real estate, subject to approval of the licensing authority.
LANDLORD AND TENANT
Tenancy laws
Research is ongoing.
ECONOMIC GROWTH
Last Updated: Aug 25, 2008
High oil prices boosted economic growth
The Kingdom of Saudi Arabia with a population of more than 24 million was formally established in 1932 by Abdul Aziz ibn Saud. He unified the dual kingdom of Hejaz and Najd, administered since 1927 as two separate units. It has the biggest economy and one of the highest GDP per capita (US$18,630 in 2007)) in the Middle East. It has more than 25% of the world’s known oil reserves.
Saudi’s government is in the form of an absolute monarchy. The King is the Head of State and Head of Government.
King Abdullah Bin-Abd-al-Aziz Al Saud has been the effective ruler since the former king suffered a stroke in the mid-1990s. He is seen as a moderate reformist.
Saudi’s economic performance over the past 25 years has been very poor, largely due to mistakes. However, during the past five years there has been respectable economic growth. The increase in oil revenues due to rise in oil prices in the global market fuelled the country’s economic growth.
Municipal elections in 2005 were a first limited exercise in democracy.
Political parties remain banned - the opposition is organised from outside the country - and activists who demand reform risk being jailed. Saudi Arabia has a tightly-controlled media and criticism of the government and royal family are not tolerated.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Looming housing slump in China
America & Caribbean
The great U.S. housing market crash
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): n.a. | Rental Yield: n.a. |
| Rent/month: n.a. | Income Tax: 0.0 Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
n.a.
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: n.a. Rating is based on a detailed study of each country’s law and practice. | |
APRIL 2009
- Saudi taps reserves: analysts - Gulf Times
FEBRUARY 2009
- Saudi real estate scam involves UAE developer - Arabian Business
NOVEMBER 2008
- Saudi cuts repo rate to boost liquidity - IHT
- Saudis will help stricken economies, says Gordon Brown - Times Online
OCTOBER 2008
- Oil prices will protect real estate sector - Arabian Business
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