Saudi Vacant Property Fee: 5% Cap and 6-Month Trigger

The annual vacant property fee will be based on a percentage of estimated rental value, capped at 5% of the building’s value. The minister will determine the annual fee rate for each city, applicable property uses and the minimum number of vacant properties owned by a single person that would trigger the fee.

How the Cap Protects Owners

The 5% cap on building value, not rental value, provides a ceiling. For example, if a building is worth SAR 10 million and the estimated rental value is SAR 500,000, the fee cannot exceed SAR 500,000 (5% of value). The actual fee rate will be a percentage of rental value, set by the minister, so the effective rate could be lower than the cap.

Risk to watch: If the minister sets the fee rate at the maximum 5% of value, owners of high-value vacant buildings face a significant annual cost – enough to force a sale or lease decision.

Geographic Zones and Ministerial Discretion

The regulations set criteria for determining geographic zones within cities that will be subject to the fee. These criteria include:

• High vacancy rates
• Elevated housing costs relative to household income
• Property price increases compared with consumer inflation
• Concentration of vacant properties owned by the same owner

The minister will determine the geographic areas subject to the levy in each city, including the annual fee rate, applicable property uses and the minimum number of vacant properties owned by a single person that would trigger the fee.

Coordination and Implementation

The ministry will coordinate with relevant authorities to implement the provisions of the law and regulations. The minister may also unify annual fee billing dates for each city separately.

Bottom line for traders: Real estate investors should monitor ministerial announcements for the first set of designated zones and fee rates. The initial zones will likely target high-demand cities like Riyadh and Jeddah, where vacancy and price distortions are most visible. Owners of multiple vacant properties in those zones face the highest exposure.

Practical Watch Items for Real Estate Investors

1. Zone designations – The first list of cities and neighborhoods subject to the fee will set the scope. Investors with holdings outside those zones are unaffected.
2. Fee rate – The percentage of estimated rental value, capped at 5% of building value, determines the annual cost. A low rate (e.g., 1-2%) may not change behavior; a high rate near the cap will.
3. Ownership threshold – The minimum number of vacant properties owned by a single person that triggers the fee. If set high, only large portfolios are hit; if low, smaller owners are also exposed.
4. Utility consumption rules – The ministry’s definition of minimum consumption will determine which properties are considered truly vacant versus temporarily unused.

The regulation is now law. The next catalyst is the minister’s first set of implementing decisions. Until those are published, the fee remains a theoretical risk rather than a concrete cost.