Gulf Bank gathered industry leaders, experts and decision makers from real estate companies, government institutions and nonprofit organizations in a closed session to discuss the present developments of the local real estate market. The session came as part of the Bank’s commitment to providing a platform where professionals can exchange insights and experiences with decision makers in an aim to advance the business environment and ultimately benefit stakeholders.
Real estate market position
Presently, the Kuwait real estate sector is considered healthy when compared to other Gulf Cooperation Council (GCC) countries, mainly due to the halt in its expansion from 2013 to 2016 which contributes to keeping supply under control. However, and despite the controlled supply, number of factors continue to affect the level of transactions and trade volumes of each real estate subsector.
Investment properties in particular saw a decline of 0.3% to 0.5% in every quarter of 2018, and closed the first quarter of 2019 with a 0.3% decline in a comparison to the same period in the previous year. The decline in these prices affected in turn trade volumes, which declined by 16.2% in the first quarter of 2019, and then witnessed a slight growth in the second quarter by 1.5% compared to the same period of 2018. Volumes declined once again by a sharp 25.7% year-on-year in the third quarter.
Residential, commercial properties
Statistics show that residential and commercial properties performed better than investment properties when it came to price levels and trade volumes. While trade volumes of residential and commercial properties increased by 47% and 57% respectively in the first quarter of this year, prices in each subsector increased by 0.2% and 0.1% respectively for the same period.
Value of lands
Value of lands in Kuwait have witnessed noticeable increases in some rare and popular locations. Between 2015 and 2016, the average price per square meter of investment properties in the capital stood at approximately KD 800, and increased to a soaring KD 1,400 to KD 1,500 today. And despite the increase in prices, a few family-owned real estate companies still hold a significant share of total trades of investment and commercial properties, while the number of vacant investment lands ranges between 1,200 and1,300 only following the large expansion seen in the market pre-2013 in response to the back then shortage in supply.
As for residential properties, the price per square meter in the Mubarak Al-Kabeer Governorate stood at approximately KD 400 between 2015 and 2016, and reached today an average of KD 600. Prices of lands in the residential sector have increased despite real estate companies absent from this sector as per the law (9/28) which prevents them from owning land for in residential areas. These companies have therefore turned to invest in other area in the GCC and Europe.
The landscape for industrial properties somewhat differs and is witnessing a growing demand for warehouses and industrial lands. Available statistics show a rise in the prices in the service and crafts sectors, however it is not driven by the industry, but by traders who control the supply and its prices.The ultimate beneficiary in this sector is the real estate trader, searching for fast financial gain and benefiting from a lack of regulations or law of ownership in this specific sector. Properties developed for retail and restaurants are also suffering today due to a weak demand, perhaps caused by high rental prices. Demand for supply in this sector can only regain balance should rents be reduced.
Land prices continue to rise at a time where Kuwait is ranked last among GCC countries in terms of spending on mega projects such as the development of its waterfront, the Shuwaikh industrial and chalet areas, the labor accommodation project, gated communities and other similar projects including industrial cities. While neighboring countries are moving towards a massive development of “Mega Projects”, many of which have been successful, Kuwait has not kept pace with this trend despite its demographic and financial fundamentals that support similar developments, subsequently opening door to opportunities that would benefit developing companies as well as community at large which these developments are built for.
Accordingly, the real estate market requires today from the government to introduce new residential, investment and commercial areas in its capacity as the main owner of lands with the objective to change the structure of trades in the sector. The step is a need today, in addition to the endeavors of the Public Authority for Housing Welfare which resulted in the launch of mega real estate projects under the PPP Law such as the development of malls, offices and investment housing in Jaber Al-Ahmad Sabah Al-Ahmad cities, as well as new residential cities such as South Saad Al-Abdullah city.