Real estate activity in Saudi Arabia witnessed a record decrease of 84.6 per cent last week after the government's decision to increase the rate of Value Added Tax (VAT) from five per cent to 15 per cent at the start of the month.
Saudi Al-Eqtisadiah newspaper reported on Saturday that the weekly activity level of the real estate market has reached less than 1.7 billion riyals ($0.45 billion) compared to 10.9 billion riyal ($2.9 billion) recorded the previous week.
The two main sectors in the Saudi real estate market, the residential and commercial sectors, have both witnessed a sharp decline in activity.
Last week, the value of residential real estate deals decreased 82 per cent reaching 1.2 billion riyals ($0.32 billion) compared to 6.9 billion riyals ($1.8 billion) recorded the previous week. Meanwhile, the value of commercial real estate deals have decreased by 89.1 per cent reaching less than 434 million riyals ($115.7 million) compared to four billion riyals ($1 billion) recorded the previous week.
Over the past few weeks, reports indicated that both dealers and consumers are racing against time to finalise their real estate deals before the new VAT rate goes into effect. According to economic reports, the decline in activity is expected to continue for several weeks and may even take several months.