Just a few days after the announcement on the part of Dubai to cap a rental rise in price at 5% regardless of location within the Emirate, nearby Saudi Arabia has experienced gigantic inflation that has led to not only large increases in property values and prices, but also skyrocketing rental prices
According to a report recently released by the Saudi Daily Arab News, the people in the Saudi city of Riyadh have had the steepest increase in their prices with the rent price increasing on average 25% from the December of 2007 price. Increases elsewhere across the country are steep as well, with 20% being the figure of average across the rest of the country and bringing the average annual rental rate for a flat to $4,800 (approximately 18,000 in local currency).
The rent hikes are being blamed on a number of different culprits, with foreign property investors, domestic owners, skilled foreign workers and demand all coming in for blame according to different analysts.
Property owners were, of course, the main cause of the rent hikes, and they say that they had no choice as the rental prices from the previous month resulted in just a 10% return on investment. This has prompted uncertainty on the part of a number of foreign investors, and even developers such as Ahmed Faqeeh have publicly disagreed with analysts who blame the rent hikes solely on foreign property investors.
According to Faqeeh, a combination of high demand, higher wages and more expensive raw materials are to blame for the rent hikes.
Either way, unless Saudi companies increase the salaries of their foreign skilled workers, many of those workers are expected to leave the country and that would decrease demand and eventually, with it, bring down the viability of the Saudi housing market.