Kuwait real estate liquidity shrinks 16.1 pct
Value of private residential activity down by 30.4 pct in August
Local Real Estate Market –
August 2017
The latest released data by the Ministry of Justice — Real Estate Registration and Authentications Department — (after excluding the crafts, exhibitions, and the Coastal Strip System) indicate drop in real estate market liquidity in August 2017 vis-a-vis July 2017 liquidity. Total value of contracts and agencies trading scored KD 159.6 million, which is -16.1% less than its counterpart value in July 2017 which scored KD 190.2 million. But it rose by 3.7%% compared with August 2016 liquidity, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.
Real Estate trading during this month was distributed between KD 154.5 million in contracts and about KD 5.1 million in agencies. Number of deals scored 311 with 300 deals for contracts and 11 deals for agencies. The highest rate in real estate deals belonged to Ahmadi Governorate by 86 deals representing about 27.7% of the total number of real estate deals. Mubarak Al Kabir Governorate came second by 69 deals, about 22.2%. The lowest share went to Farwaniya Governorate which got 32 deals, about 10.3% of the total.
Value of private residential activity scored KD 70.9 million, down by about -30.4% compared with KD 101.9 million in July 2017 representing 44.4% of the total real estate trading vis-a-vis 53.6% in July 2017. The monthly average value for private residence trading in 12 months scored about KD 102.6 million. This means that this month trading value is lower by -30.9% than the average. The number of deals for this activity also declined to 227 deals in this month versus 317 deals in July 2017. Therefore, the average value per deal of private residence activity scored about KD 312.4 thousand.
Likewise, investment housing activity dropped to about KD 36.2 million, down by -50.2% from KD 72.8 million in July 2017. However, its contribution to total liquidity dropped to about 22.7% versus 38.3% in July /2017. Monthly trading average value of investment housing during 12 months scored KD 60.1 million. This means that trading value in this month was lower by -39.8% than the 12 months’ average. Its deals dropped to 69 (108 deals in July 2017). Therefore, the per deal average value for investment housing scored KD 524.9 thousand.
Commercial activity trading value rose to about KD 52.5 million, up by 281.1% compared with KD 13.8 million in July 2017. Its percentage out of total real estate trading value rose to 32.9% compared with 7.2% in July 2017. Average value of commercial activity trading in 12 months scored about KD 41.1 million. This means total trading in this month is higher by 27.7% compared with 12 months’ average. It had 15 deals (4 deals in July 2017). As such, the average value per deal for the commercial activity scored about KD 3.5 million. There was no deals in the warehousing activity.
When we compare August 2017 trading with its counterpart period in 2016, we note an increase in the real estate market liquidity from about KD 153.9 million to KD 159.6 million, i.e. 3.7%. The rise included the commercial activity only by 217.3% while the investment housing activity dropped by -37.7%. The private residential activity liquidity dropped by -9.1%.
When we compare total trading value since the beginning of the year until August 2017 with its 2016 counterpart, we note drop in total real estate market liquidity from KD 1.68 billion to KD 1.65 billion, or by -2.1%. If we assume continued market liquidity level at the same level during the remaining 4 months of the year, market trading value would score KD 2.47 billion, which is KD 27.6 million lower than the total for last year of KD 2.5 billion, i.e., drop by -1.1% compared with 2016.
Buildings and Real Estate Units
– June 2017
In accordance with the latest issue of the Public Authority of Civil Information’s Guide for Buildings and Units, total number of buildings in Kuwait in the end of June 2017 scored about 200.7 thousand buildings in the end of June 2017 (199.2 thousand buildings in the end of 2016), achieving a growth rate by 0.7%, (1.4% on annual basis), which is less than the registered annual growth rate in the end of 2016 compared with the end of 2015, which scored 1.8%.
Buildings are divided into different
File photo shows traders at Boursa Kuwait floor. Thursday trading ended in red. —
units which numbered about 702.5 thousand units in the end of June 2017 (692.3 thousand units in the end of 2016), reflecting 1.5% rise (3% on annual basis). The compound growth rate for the number of total units during the period from the end of 2007 to June 2017 scored 2.8% while the compound growth rate in the number of buildings for the same period came less and scored 1.6%. This confirms a continued trend in reducing units’ areas within each building. This means the change in the demand pattern continued in the same manner, perhaps due to high land price and the high rental level. Most buildings in Kuwait are used for residence and form about 68.5% of the total number of buildings. Units assigned for both housing and work come next and finally those which are assigned for work only.
Percentage of vacant buildings dropped slightly in the first half of the year, as per PACI figures, and scored 11.8% and numbered approximately 23.7 thousand buildings out of a total of 206.7 thousand buildings (23.9 thousand vacant buildings, out of a total of 199.2 thousand buildings in the end of 2016, i.e. 12%). The following table shows the number of buildings and their usage type as per governorates as of June 30, 2017.
According to PACI statistics, apartments form the majority of units and represents 46.8% of the total, followed by houses by 22.1%, then shops by 18%. Apartments and houses sector maintained its regular increase in its share since 2007 until June 2017, contrary to the percentage of annexes which dropped. Compound growth rate (2007 - June 2017) for apartments, shops and houses scored about 3.4%, 3.4% and 1.5%, respectively; it however dropped for annexes by about -6%. The percentage of vacant units in June 2017, according to PACI estimates, the vacant remained stable in June 2017 and the end of 2016 at 26%.
Oil and Globalized Chinese Yuan
China has become the biggest oil importer in the world. Its oil imports in 2016 worth US$ 116.2 billion visa-vis US$ 108.1 billion for the United States, whose imports dropped because of developed shale oil production technologies. Oil is the second largest partner in the international commodity trading, — after the auto trade, and its share accounted for 4.4% of the world imports-. Its share out of its value in 2016 scored US$ 680 billion or by 4.2% of the value of world commodity imports, while the share of its value in 2012, scored about US$ 1751 billion. Oil is priced in US dollars, like most basic commodities, because of the dominance of the US dollar and its role as the most important currency for international monetary reserves. As the oil market is weak, and as the movement of oil prices and production is the most important variable affecting the economic, political and social stability of the oil-producing states, the frequently asked question in the past few weeks was about the impact of China’s intentions in creating future oil contracts priced in Yuan with guarantees of converting it to gold upon maturity.
In our opinion, there will be no significant impact on the oil states at least in the foreseeable future of such a move because its logical and strategic justifications and objectives are linked to major economic transformations and the struggle for superiority and hegemony in our contemporary world. Nowadays, the United States is the hegemonic superpower and an emerging and united superpower -unlike the EU, namely, China. In old history, the substitution of an alternative big power to a dominant power was by war, hot or cold, while the economy has become the decisive factor in resolving superiority, both now and in the future. The Chinese economy has become the world’s second largest economy since 2010, and this was achieved in record time. It currently grows at rates of 3 – 4 times the growth of the United States and the European Union. That means it will become the world’s largest economy within about 10 years. As the US$ removed the sterling pound gradually from its position being the global reserve currency after the First World War, China is trying to lay the first building blocks for internationalizing of the Yuan and competing with the US dollar. This means acquisitions of means, influence and power that accelerate restoration of its leadership of the global economy, as in Asia two centuries ago.
The resolution, as we mentioned, is just a brick on a long road that may take decades to achieve its goal. But it is China which changed its development model in 2012 fearing dominance of external influences after extrapolating lessons of the 2008 crisis. It is worth noting that China has a roadmap for half a century ahead.
In short, China is the largest importer of oil which is the second most important international trade commodity. China is the largest
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contributor to the international commodities trade; its economy is the highest in growth rate in the world. However, its currency is local. To complete superiority elements needs internationalization, which has no direct impact on supply and demand aspects for oil. Our oil states have failed so far in dealing with a weak oil market. The source of the probable negative repercussions is due to that failure and not an early step in a long way to globalize the Yuan.
Boubyan Bank Financial Results
– First Half 2017
Boubyan Bank announced results of its operations for the first half of the current year, which indicate that the bank’s profits -after tax deductions-scored about KD 21.8 million, rose by KD 2.9 million, or by 15.1%, compared with KD 18.9 million for the same period of 2016. The rise in net profits is due to the rise in total operating incomes by a higher value than the rise in total expenses.
In details, total operational incomes of the bank increased by about KD 8.7 million, or by 17.1%, and scored about KD 59.9 million, vis-avis KD 51.1 million for the same period of 2016. This resulted from the rise in net financing incomes by about KD 7.3 million and scored KD 50.3 million compared with about KD 43 million. The item of net investment income increased by about KD 1.7 million and scored about KD 3.4 million, compared with KD 1.7 million. While the item of net fees and commissions decreased by KD 903 thousands and scored KD 5.1 million, compared with KD 6 million.
Total operational expenses increased by less value than the rise in total operational incomes, i.e. by about KD 3.7 million, and scored KD 25.2 million, compared with KD 21.5 million in the same period of 2016, a rise by 17.1%. The rise included all items of operational expenses. Provision of impairment increased by KD 2.1 million and scored KD 11.9 million, compared with KD 9.8 million, a growth rate of 21%. While net profit margin decreased by 36.4% of total operational incomes, compared with 37% in the same period 2016, due to the increase in the total operational incomes by a higher value than the increase in net profit.
The bank’s financial statements indicate that total assets increased by about KD 251.5 million, or by 7.2%, and scored KD 3.733 billion, versus KD 3.482 billion in the end of 2016. While the total assets increased by about KD 325.5 million, or by 9.6%, if compared with the same period of 2016, when it scored KD 3.408 billion. Item of Islamic financing to customers increased by KD 258 million, or by 10.3%, and scored KD 2.775 billion (74.3% of total assets), compared with about KD 2.517 billion (72.3% of total assets) in the end of 2016. It increased by 17.6%, or by KD 415.2 million, and scored about KD 2.360 billion (69.2% of total assets), compared with the same period of 2016. Percentage of Islamic financing to customers to total depositors’ account scored 87.5% compared with 84.6%.
Figures indicate that the bank’s liabilities (without calculating total equity) increased by KD 244.3 million and scored about KD 3.303 billion, compared with KD 3.059 billion in the end of 2016. If compared with total liabilities in the same period of last year, it would increase by about KD 299.4 million, or by 10%, when it scored KD 3.004 billion. Percentage of total liabilities to total assets scored about 88.5% compared with 88.1%.
Results of analyzing financial statements calculated on annual basis indicate that all bank’s profitability indexes rose compared with the same period of 2016. The average return on bank’s capital (ROC) increased to 19.6% compared with 17.9%. Likewise, the average return on equities relevant to the bank shareholders (ROE) increased to 12.5% versus 11.7%. The average return on assets (ROA) rose slightly and scored 1.21% versus 1.16%. (EPS) scored 8.5 fils compared with 8.3 fils. (P/E) scored 23.8 times compared with 22.8 times, as a result of the rise in the share market price by about 6.6%, against less rise in the (EPS) by 2.2% compared to June 30, 2016.
(P/B) scored 2.1 times versus 2 times.
The Weekly Performance of
Boursa Kuwait
The performance of Boursa Kuwait for last week was more active compared to the previous one, where all indexes showed an increase, the traded value index, the traded volume index, number of transactions index, and general index, AlShall Index (value weighted) closed at 436.6 points at the closing of last Thursday, showing an increase of about 13.1 points or about 3.1% compared with its level last week and increased by 73.6 points or about 20.3% compared with the end of 2016.
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