The introduction of the 2.5 per cent annual tax on unused land by the Saudi government is likely to bring down the property prices by up to 40 per cent in areas outside the main cities, said a report.

The new 'white land tax' is also expected to increase investment in the property sector, stabilise the market and see major developments over the next two years, reported Arab News, citing property experts.

Mansour Abu Riyash, chairman of the real estate committee at Makkah Chamber of Commerce and Industry, said the tax would see prices drop between 20 and 40 per cent over the next two years and then stabilise. It would also boost the market over the next three years.

He estimated that 40 per cent of land in major cities were not being used, which could result in returns of up to SR30 billion ($8 billion) if developed, he stated.

Khalid Al Ghamdi, chairman of the real estate committee at the Jeddah Chamber of Commerce and Industry (JCCI), pointed out that the fees would boost the sector and bring prices back to normal levels.

The new 'white land tax' will help end monopolies and force owners to either develop, sell or pay fees, stated his JCCI colleague Awad Al-Dosi, deputy chairman of the valuation committee. This would see prices drop by around 30 per cent, he added.