Kuwait real es­tate mar­ket gains trac­tion in Q3 2017

Sales pick up, prop­erty prices sta­bi­lize

Kuwait Times - - Business -

KUWAIT: Ac­tiv­ity in the real es­tate mar­ket is gain­ing trac­tion with a pickup in sales and sta­bi­liz­ing prices. Real es­tate sales posted healthy 20 per­cent year-on-year (y/y) growth in 3Q17, the first pos­i­tive growth since 4Q14, de­spite the sea­son­al­ity that cus­tom­ar­ily reigns over the quar­ter. The pos­i­tive pickup in ac­tiv­ity also trans­lated into fur­ther sta­bi­liza­tion in real es­tate prices, with indices hov­er­ing around their 12-month av­er­age. Com­pa­ra­ble sta­bi­liza­tion is seen in other GCC real es­tate price indices de­spite slight di­ver­gence in trends.

The res­i­den­tial sec­tor re­mained sup­port­ive of the real es­tate mar­ket through­out the first three quar­ters of the year. Res­i­den­tial sales reached KD 226 mil­lion in 3Q17, up 20 per­cent y/y. Year-to­date (ytd) sales tal­lied up to KD 879 mil­lion over 2,519 trans­ac­tions. As for the month of Septem­ber, sec­tor sales were up 28 per­cent y/y with trans­ac­tions im­prov­ing by 36 per­cent y/y. Re­newed in­ter­est in the sec­tor was not chan­neled through a spe­cific type of prop­er­ties; both home and plot sales ad­vanced, ris­ing by 26 per­cent and 21 per­cent, re­spec­tively ytd.

Res­i­den­tial sales reach KD 226m in Q3

Strong third quar­ter ac­tiv­ity helped support res­i­den­tial prices fur­ther. The NBK res­i­den­tial home price in­dex reached 153.1 in Septem­ber, flat from a year ago. The NBK res­i­den­tial land price in­dex soared to 172.8 in Septem­ber, up 4 per­cent for the month, though it re­mains down 5.5 per­cent y/y. Al­though res­i­den­tial prices are down around 17 per­cent from their peaks, their an­nual pace of de­cline has come down from double-digit to less than 5 per­cent, sug­gest­ing the end of the price cor­rec­tion.

In­vest­ment prop­er­ties’ ac­tiv­ity re­mains off, not in line with the spur in the res­i­den­tial sec­tor, as other mar­kets seem more ap­peal­ing to in­vestors. 3Q17 sales reached KD 160.5 mil­lion, down to a third of what was recorded in 3Q14. The ex­cep­tional per­for­mance of Kuwait’s stock mar­ket this year may have de­terred in­vestors from in­vest­ing in real es­tate. With stocks gen­er­at­ing double-digit growth so far this year, the in­vest­ment sec­tor, plagued by in­creased va­cant apart­ments, lower hous­ing in­fla­tion (i.e. rents) and higher util­ity bills, was not able to gen­er­ate com­pa­ra­ble re­turns.

The per­sis­tently slow ac­tiv­ity in the sec­tor con­tin­ues to ex­er­cise neg­a­tive pres­sure on in­vest­ment prop­erty prices. The NBK in­vest­ment build­ing price in­dex re­treated to 171.1 in Septem­ber, down 5.7 per­cent y/y. The price in­dex has set­tled at lev­els last seen at the end of 2013. The in­dex is off by 25 per­cent from its peak in July 2015.

The com­mer­cial sec­tor wit­nessed a healthy third quar­ter. 20 com­mer­cial prop­er­ties were sold dur­ing the quar­ter for a to­tal value of KD 74 mil­lion. This quar­ter’s trans­ac­tions were pre­dom­i­nantly com­mer­cial build­ings and of­fices. Ytd, the sec­tor is 30 per­cent short on sales and 20 per­cent on trans­ac­tions. Re­gional real es­tate res­i­den­tial price indices are ex­hibit­ing sim­i­lar signs of sta­bi­liza­tion de­spite the di­ver­gence in trends caused by the het­ero­ge­neous macroe­co­nomic and geopo­lit­i­cal out­looks of each of the GCC coun­tries. Abu Dhabi prices ap­pear among the most sta­ble in the re­gion, with prices ad­vanc­ing 5.4 per­cent y/y in June 2017. Qatar prices on the other hand were the last to cor­rect, with the res­i­den­tial in­dex down 5.5 per­cent y/y in June. KSA re­cently launched real es­tate quar­terly indices, which re­veal a down­ward trend since 2016; as of June the gen­eral res­i­den­tial in­dex is down 7.9 per­cent y/y.

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