Kuwait real estate activity
Sales muted in April; approved loans down 31%
Activity in the real estate market continues to be muted despite the improvement in oil prices and the stock market during the last two months. Real estate activity softened in April following a slight pickup in March. Real estate sales continue to lag performance from a year ago, with the exception of the commercial sector. Sales totalled KD 902 million year-to-date, down 22% for the same period last year. Meanwhile, NBK’s real estate price indices were mixed. While the residential home price index slipped to its January 2014 levels, the other two indices posted stable and positive growth y/y, hinting at some firmness.
Activity in the residential sector cooled after a somewhat better performance in March. The sector registered 186 transactions during the month worth KD 60 million, down by 49% and 54% y/y, respectively. The slowdown was more pronounced than in March.
Residential real estate price indices posted mixed signals. The NBK residential home price index slid 6.9% y/y for the second consecutive month bringing down the price index to January 2014 levels. On the other hand, the residential land price index, which has been highly correlated with oil prices, remains firm as oil prices crept back above $45 per barrel. At 197 points, the index recorded a growth of 8.2% y/y.
In the investment sector, sales continued to soften in April, recording KD 75 million in sales for the month as smaller single apartments (for investment) dominated activity.
Apartment transactions were 111 in April, more than double from a year ago. The shift in the composition of investment sector sales towards individual apartments rather than buildings resulted in a 35% y/y decline in April KD sales while the number of transactions improved by 12.3% y/y.
There was little change in the investment-building price index in April. The index stood at 212 points, 0.5% above the previous year. The rising demand for small-ticket investments, coupled with rising construction material costs which could inject more volatility into investment prices.
Commercial sector sales continued to improve from the previous year. Sales for the month totalled KD 60.4 million, up 13.3% y/y. This was on only 11 transactions, half the number recorded during the same period last year.
The two largest transactions recorded were; a new office tower in Al Murqab for KD 18 million and a commercial tower in Jahra for KD 8.15 million.
Kuwait Credit Bank (KCB) approved KD 19.2 million loans in April. The value of approved loans during the month was down 31% y/y, it was the lowest in five years, signalling a slow start for the bank’s fiscal year. Disbursed loans were up by 12% y/y totalling KD 27.1 million. Loans approved or disbursed for new constructions were down by 56% and 57%, respectively.