The housing prices in Saud Arabia will drop about 30 per cent due to falling oil prices, distribution of more low-cost homes and the imposition of Zakat on vacant land, said a report.

Real estate developers and owners are facing pressure to reduce prices, reported the Arab News, citing a real estate expert.

"The real estate market is facing an unprecedented recession and many agents have spoken about falling sales," Bandar Al Aboud was quoted as saying in the report.

This would result in prices reaching reasonable levels, he added.

Al Aboud said commercial banks in the kingdom too have played a role in hiking prices by granting huge amounts to citizens in long-term housing loans. “This increased liquidity has led to skyrocketing prices,” he added.

According to him, the new real estate financing law, which has been approved by the Saudi Arabian Monetary Agency, would solve the country’s housing problem.

The government decision to impose Zakat on vacant land within cities would help bring prices down, he said. About 70 per cent of plots in the capital Riyadh were in this category, with 60 per cent in the Eastern Province and 50 per cent in Qassim, he added.