Real estate market to ensure data accuracy; achieve price balance on supply, demand: Realtors

Riyadh city

The Saudi real estate market will ensure data accuracy for each real estate asset and achieve a balance in price levels according to the supply and demand in the market, realtors told Argaam.

Realtors expect the market value of the real estate assets to be added and traded in the first phase of the real estate market to reach about SAR 3.7 trillion.

Investment and real estate finance specialist, Ibrahim Al Sahn, said that the idea and work mechanism of the real estate market is not yet clear.

However, according to the initial perceptions and statements of the officials, it is expected to represent a real estate database with all details and documented from the reality of the instruments found in the writings of justice.

Accordingly, the property will be highlighted in the stock market to receive sale and purchase bids, and conduct the transactions in a disciplined and formal manner.

Abdul Hamid Al-Omari, a member of the Saudi Economic Association (SEA), defined the real estate market as a project whose work mechanism is based on the principle of supply and demand.

The seller has the right to offer his property at the price he deems appropriate with a commitment to sell with a contract that extends for a period of 10 days (more or less). During this period, he cannot withdraw his sell offer. On the other hand, the buyer is bound by the price he is willing to pay for the purchase.

The intermediate accounts should be made with the real estate market, where the purchase amounts are transferred by potential buyers or those looking to purchase real estate assets from the offers available on the stock exchange. This will confirm that the buyer has sufficient financial solvency to complete deal.

Al-Omari highlighted that the essential role of the real estate market is to control and perform market transactions electronically and prevent any manipulation or attempts to raise or lower prices.

The real estate market's work, according to electronic governance, in the presence of intermediate accounts, will help eliminate all forms of fake or fictitious purchases, which are relied upon by price manipulators in order to raise market prices and project the illusion of higher demand.

He indicated that all available sukuks on the market are eligible for listing without any restrictions on them or the owners. This means that the previous mistakes suffered by the market will not be repeated.

The real estate market has the possibility of completing five times the current trading volume, and its trading value to exceed the ceiling of SAR 2 trillion. This will qualify it to be one of the largest tributaries of the national economy.

The stock exchange will raise the transparency level in the local real estate market, as all parties will be able to know the size and value of the real estate assets on offer, their numbers, geographical locations, and types.

In the medium- and long-term, the market will realize the desired balance in price levels according to the supply and demand for the first time under a high level of transparency.

The real estate market is projected to facilitate real estate trading and monetization in record time compared to previous procedures, in addition to the possibility of executing deals for real estate traders from anywhere, whether local or abroad.

Al Sahn clarified that the most important benefits that the real estate market will achieve are data fixation and accuracy for each registered real estate asset, in addition to procure knowledge of details related to the type of the asset, its components, limits, or any other information and procedures, including mortgage or any legal problems that prevent operations or benefiting from the property.

He further said that the need for the real estate market to set the prices of sell and purchase bids and determine the mechanism and binding conditions for executing the transaction at the prices offered by the seller and accepted by the buyer during the contract’s validity period.

Al Sahn believes that the seller or buyer's reluctance to finalize the transaction at the pre-determined price is one of the reasons for the large number of judicial disputes in the real estate market.

He pointed out the importance of organizing the real estate market for the roles of property brokers and the participation of those licensed in documenting information and managing the relationship between the seller and the buyer, as well as ensuring eligibility of their commission in the executed transactions.

Al-Sahn said that the real estate market should not compete with property marketing platforms and offices to become a substitute for them, as “it will be a bad idea”. Rather, the real estate market must provide an information structure and develop tools to create better business and procedures for companies to serve the sector efficiently.

“According to the statements of the Supervisor General of the real estate market at the Ministry of Justice, the market will not interfere with the work of real estate companies and offices, whose role will be limited to property management and brokerage agreements or other related businesses,” Al-Omari said.

Businessman Abdul Ilah Al-Qassim said that the real estate market aims to attract investments for real estate projects. Its impact on the Saudi property market will be very positive, as it will ensure information accuracy and enable them to trade property equity and sukuks easily and quickly in less time and huge margins.

It is difficult to predict the trading volume in the real estate market after its launch, but one of the platform's goals is to give confidence to traders, and thus, the number of traders and trading value will accordingly increase in the next few months.

Al-Qassim pointed out that the Kingdom’s real estate wealth is estimated at more than 100 million real estate documents, as 10 million of them were digitized as part of the real estate wealth digitization initiative. The real estate sector is the second largest and most important economic sector after oil.

According to Al-Omari, the total number of real estate deeds ranges between 15 million and 18 million, according to the Supervisor General of the real estate market at the Ministry of Justice. Based on the official market data for the period 2010-2021, the total number of property transactions reached nearly SAR 2.8 trillion.

The number of sold properties exceeded three million during the same period. Based on the average value per property in that period, the market value of those deeds can be estimated between SAR 13.8 trillion (15 million deeds) and SAR 16.5 trillion (18 million deeds).

Accordingly, the market value of real estate assets can be estimated in the initial phase of the market, as what was stated by the Supervisor General. Moreover, one million out of 4fourmillion property deeds available with the Ministry of Justice at present were updated.

If the market will launch operations using the updated deeds, their market value in the first phase will be estimated at SAR 1 trillion. The market value might reach almost SAR 3.7 trillion, if the ministry completes updating four million deeds in tandem with the real estate market launch, Al-Omari said.

Elsewhere, Al-Sahn said that the size of real estate assets traded in the Saudi market is varying. “The average value of transactions is estimated at nearly SAR 300-350 billion annually. I expect this value or more to be traded on the real estate market.”

“There is no accurate data about the total size of real estate wealth in the Kingdom. However, the property market officials cited a value of over SAR 15 trillion. The majority of those real estate assets are neither offered for sale nor owned by the government or other individuals,” he concluded.

According to data compiled by Argaam, the Supervisor General of the real estate market at the Ministry of Justice recently stated that the market will be launched by Q4 2021, and expanded in the coming year.

He further explained that the role of the real estate market is essential as it will control operations and prevent any manipulation or attempts to raise or lower prices.