Real es­tate prices sta­bi­lize, but volatil­ity re­mains

NBK ECO­NOMIC RE­PORT

Kuwait Times - - BUSINESS -

KUWAIT: In­creased volatil­ity in real es­tate ac­tiv­ity dom­i­nated the first half of 2017 amid steady­ing prices. De­spite some volatil­ity, mar­ket ac­tiv­ity im­proved sig­nif­i­cantly dur­ing the first half of the year com­pared to 2H16, though it re­mained down 10 per­cent com­pared to a year be­fore. Im­proved ac­tiv­ity was par­tic­u­larly vis­i­ble in the res­i­den­tial sec­tor. This also helped keep real es­tate prices mostly steady dur­ing 1H17.

Ac­tiv­ity in June ex­pe­ri­enced the usual slow­down from the start of sum­mer and the holy month of Ra­madan. June sales eased to KD 163.6 mil­lion, down 14.6 per­cent year-on-year (y/y). The an­nual de­cline was mostly due to weak­ness in the in­vest­ment and com­mer­cial sec­tors; how­ever, res­i­den­tial sec­tor ac­tiv­ity mit­i­gated fur­ther weak­ness with healthy ac­tiv­ity de­spite the sea­sonal fac­tors. Real es­tate price in­dices con­tinue to hover around their six month av­er­ages, ex­cept for the res­i­den­tial land price in­dex that has re­treated some­what.

The res­i­den­tial sec­tor main­tained a solid per­for­mance that sup­ported over­all ac­tiv­ity in June, with re­vived in­ter­est in res­i­den­tial plots. Grow­ing at 15.7 per­cent y/y, res­i­den­tial sales amounted to KD 102 mil­lion in to­tal on 308 trans­ac­tions. 161 plot sales were recorded dur­ing the month, an 85 per­cent in­crease from the pre­vi­ous year; most ac­tiv­ity was in Abu Ftaira and Al-Salam ar­eas. Dur­ing 1H17, 757 res­i­den­tial plots were sold com­pared to 629 plots for the same pe­riod last year.

Res­i­den­tial home prices re­main steady as res­i­den­tial land prices ease slightly. The NBK res­i­den­tial home price in­dex stood at 151.8 in June, flat for the month once again; the con­trac­tion from a year ago was the slow­est in thir­teen months at 7.7 per­cent y/y. The NBK res­i­den­tial land in­dex eased to 162.9 in June from 168.0 in May, dragged down by a bulk sale of 49 plots at a rel­a­tively lower mar­ket price; the pace of de­cline from a year ago re­mained steady at 10-12 per­cent y/y, a pace that was sus­tained dur­ing the last three months.

The in­vest­ment sec­tor con­tin­ues to un­der­per­form de­spite the short-lived surge in ac­tiv­ity in May. Sec­tor sales to­taled KD 50.8 mil­lion, down 30.8 per­cent y/y. The num­ber of trans­ac­tions was also down by 25 per­cent y/y to 74. Apart­ment sales con­tinue to carry the in­vest­ment sec­tor dur­ing the cur­rent en­vi­ron­ment. Sin­gle apart­ments bought for in­vest­ment rep­re­sented 61 per­cent of to­tal trans­ac­tions.

The NBK in­vest­ment build­ing price in­dex re­mained steady in June. The in­dex came in at 190.1 down only 5.6 per­cent y/y, an im­prove­ment from the dou­bledigit de­cline rates recorded the pre­vi­ous year. Hous­ing in­fla­tion and in­vest­ment prices align af­ter the re­cent in­fla­tion re­vi­sion to the CPI. The rise in va­cant apart­ments and the slow­down in mar­ket ac­tiv­ity have ex­er­cised down­ward pres­sure on rents that was not vis­i­ble in the in­fla­tion data un­til re­cently. The re­vi­sion of the con­sumer price in­dex, which showed hous­ing rents down 2.3 per­cent y/y for June were more in line with real es­tate prices and ac­tiv­ity.

The com­mer­cial sec­tor posted the low­est ac­tiv­ity since Oc­to­ber 2016 with to­tal sales amount­ing to just KD 10.9 mil­lion. Four trans­ac­tions were recorded in June, the largest be­ing a com­mer­cial plot in Qi­bla for KD 4.95 mil­lion.

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