Commercial sector boosts Kuwait real estate sales
NBK ECONOMIC REPORT
The real estate market received a significant boost from the commercial sector in November, pushing the monthly sales above KD 200 million for the first time in six months. Activity and KD sales of the residential and investment sectors continued to lag last year’s performance by 22 percent year-on-year (y/y) each. Sales in all sectors totaled KD 2.04 billion year-to-date (ytd), down 27 percent y/y. November’s price performance, as reflected in NBK’s real estate price indices, indicates some stabilization and convergence of trends across sectors.
Notwithstanding the occasional strong month, the residential sector sales have been generally weak throughout 2016. Sector sales totaled KD 71.4 million on 244 transactions during the month. KD sales and transactions were both down 25 percent and 21 percent y/y, respectively. The softness in this sector is congruent with the slowdown in installment loans and bank credit to the real estate sector.
Residential real estate prices have come down from peaks and lay close to 2013 averages. The NBK residential home price index stood at 152.5, retreating by 12 percent y/y. The index has been trending downward since the beginning of 2015, when it peaked at 186 in January 2015; it is down 18 percent from its January peak. Meanwhile, the residential land price index inched slightly upward in November to 178.2, though it remains down 9.5 percent y/y and 13 percent below its peak in March 2014.
Investment sector sales this November remained relatively subdued. Sales totaled KD 57.9 million, down 1 percent month-onmonth (m/m), in 112 transactions. The sector’s activity throughout the last two months has been generally soft, reminding us of the summer lull, despite the pickup in investment building sales.
The investment building price index retreated marginally in November, erasing the previous month gain. The NBK investment building price index shed four points this month to 180.5, and remained down 13 percent y/y. After posting modest gains since the first quarter of the year, the index has been on a downward trend during the last eight months. The index has seen some basis effect, coming off record highs seen between June and August 2015.
The commercial sector provided the only support for the real estate market this month. Sales soared to KD 82.5 million, the second highest performance this year. Yearto-date sales were up 5 percent from the same period last year. This was based on only nine transactions; the largest transactions recorded were two commercial plots in Sabah Al-Ahmad Sea City for KD 20.3 million and a commercial plot in Salmiya for KD 2.6 million.