Kuwait’s real estate market liquidity up in September
Boursa Kuwait performance during week mixed Al-Shall Index
Local Real Estate Market –
September 2018
The latest released data by the Ministry of Justice – Real Estate Registration and Authentications Department – (after excluding the crafts activity and the coastal strip system) indicate an increase in real estate market liquidity during September 2018 versus August 2018 liquidity. Total value of contracts and agencies traded during September scored KD 211.1 million which is a 55.6% increase than its counterpart value in August 2018 which scored KD 135.6 million. At the same time, liquidity increased by 28.6% when compared with September 2017 liquidity that totalled KD 164.2 million. Trading during September 2018 was distributed between KD 200.3 million to contracts and about KD 10.8 million to agencies. Number of real estate deals in this month scored 453 deals of which 439 contracts and 14 agencies. The highest share in real estate deals went to Al Ahmadi Governorate by 140 deals representing about 30.9% of the total number of real estate deals. Hawaly Governorate came second by 90 deals and representing 19.9%. The lowest share went to Al Jahra Governorate by 40 deals, representing 8.8% of the total.
Value of private residential activity scored KD 98.1 million, higher by 50.9% compared with KD 65 million in August 2018. Its contribution percentage declined to 46.5% of the total real estate trading versus 47.9% in August 2018. The monthly average value for private residence trading in the last 12 months scored KD 1,068 million. This means that September trading value is lower by -8.1% than the average. The number of deals for this activity increased to 308 deals versus 221 deals in August 2018. Accordingly, the average value of private residence activity deal scored about KD 319 thousand versus KD 294 thousand in August 2018, indicating an 8.3% increase.
Value of investment housing activity scored KD 109.8 million, higher by 74.1% from KD 63.1 million in August 2018. Its contribution to total liquidity increased to about 52% versus 46.5% in August 2018. Monthly trading average value of investment housing during 12 months scored KD 107.4 million. This means that trading value during September 2018 was higher by 2.3% compared with 12 months’ average. In addition, its deals increased to 144 deals compared with 85 deals in August 2018. Therefore, the average value per deal for investment housing scored KD 763 thousand versus KD 742 thousand in August 2018, ie 2.8% increase.
Commercial activity trading value declined to KD 3.2 million, or by -57.6% compared with KD 7.5 million in August 2018. Its percentage out of total real estate trading value decreased to 1.5% compared with 5.6% in August 2018. Average value of commercial activity trading in 12 months scored about KD 41.3 million. This means that total trading value in September was lower by -92.2% than the last 12 months’ average. Its deals totalled to 1 deal compared with 3 deals for August 2018. The average value per deal for September 2018 scored KD 3.2 million versus KD 2.5 million average for August 2018, a 27.2% increase.
When we compare total September 2018 trading with September of 2017, we note that liquidity increased in the real estate market from KD 164.2 million to KD 211.1 million, ie 28.6% increase as mentioned previously. The increase included the liquidity of the investment housing activity by 57.6% and the private residential activity by 14.3%, while the commercial activity declined by -57.3%.
When we compare total trading value since the beginning of the current
The photo shows the Boursa Kuwait trading floor. The market was mixed during the week.
year until the end of September 2018 with its 2017 counterpart, we note an increase in total real estate market liquidity from KD 1.810 billion to KD 2.509 billion, a 38.6% rise. If we assume that market liquidity level will continue at the same level for the remainder of the year (3 months), market trading value would amount to KD 3.345 billion, which is KD 963.1 million higher than the total of last year. This represents a 40.4% rise above 2017 level which scored KD 2.382 billion.
Gross Domestic Product (GDP) –
Second Quarter 2018
The Central Statistics Administration (CSA) published two weeks ago the gross domestic product (GDP) figures for the second quarter of 2018 in fixed prices. These figures indicate from the second quarter of 2017 to the second quarter of 2018, real GDP growth was achieved at 1.9%, as a positive growth of 1.4% was achieved between the first and second quarters of 2018. Positive growth in second quarter in comparison to the first quarter in the previous year was a result of growth in the oil sector of 1.9%, while the non-oil sector had positive growth was marginal, at around 0.8%.
These figures indicate that current government initiatives and all the government’s economic development plan to diversify national sources of income as a means of achieving economic sustainability are not being achieved. Rather, the structural economic production base is still dependent on the performance of the oil sector (the public sector) continues to compose a significant proportion of GDP, as can be seen from recently published figures. The contribution of the oil sector at fixed prices still formed more than half of GDP, as can be seen in how in the first quarter, it was 55.8%, and in the second quarter of 2018, it was at 56%. This means that non-oil sectors contribution to GDP in the second quarter of 2018 did not exceed 44%, which is an unsustainable contribution because it is strongly supported by the sovereign oil sector revenues. Additionally, other sectors contribution to GDP did not exceed 10%, except for the public administration sector, the defense and social security sectors, which comprised of 10.6%, and aren’t sectors that contribute to economic development.
Trading Features at Boursa
Kuwait – September 2018
Kuwait Clearing Company (KCC) issued its report regarding “Trading Volume According to Nationality and Category” for the period of 01/01/2018 to 30/09/2018 as published on the official website of Boursa Kuwait. The report indicated that individuals still form the largest trading category despite the drop in their share. They captured 37.1% of total value of purchased shares (49.39% for the first 9 months of 2017) and 36.2% of total value of sold shares (49.44% for the first 9 months of 2017). Individual traders purchased shares in the amount of KD 1.165 billion and sold shares worth KD 1.138 billion with a net purchased trading at KD 26.194 million.
The second largest contributor to the market’s liquidity is the institutions and companies sector which captured 34.6% of total value of purchased shares (20.8% for the same period of 2017) and 28.1% of total value of sold shares (20.6% for the same period of 2017), and their contribution is increasing. This sector purchased shares worth KD 1.087 billion and sold shares worth KD 882.664 million with the most net purchased trading value of KD 203.901 million.
The third contributor to market liquidity is the clients’ accounts (portfolios) sector which captured 23.4% of total value of sold shares (22.8% for the same period of 2017) and 20% of total value of purchased shares (21% for the same period of 2017). This sector sold shares worth KD 736.058 million and purchased shares worth KD 628.048 million, with a net sold trading value of KD 108.010 million.
The last contributor to liquidity is the investment funds sector which captured 12.2% of total value of sold shares (7.2% for the same period of 2017) and 8.3% of total value of purchased shares (8.8% for the same period of 2017), and their contribution is also increasing. This sector sold shares worth KD 383.884 million and purchased shares worth KD 261.799 million, making it the most sector with a net sold trading, of KD 122.085 million.
Boursa Kuwait still continues to be a domestic Boursa with more share for Kuwaiti traders being the biggest trading group. They sold shares worth KD 2.559 billion, capturing 81.5% of total sold shares (88.8% for the same period of 2017), and purchased shares worth KD 2.350 billion capturing 74.8% of total value of purchased shares (86.7% for the same period of 2017). Becoming the most selling with a net trading value of KD 209.376 million. This indicates a continuous trend for the local investors to drop their investments in the domestic Boursa.
Percentage share of other investors out of the total purchased shares value, scored 20% (9.1% for the same period of 2017), and purchased shares worth KD 628.269 million and sold shares worth KD 414.222 million, 13.2% of total sold shares (7.7% for the same period of 2017); thus making their trading value the only purchasing with a net purchased of KD 214.047 million. This means that the foreigner investor’s confidence in the domestic Boursa is increasing and the appetite of the investors from outside the Gulf region has grown to invest more in the local Boursa, after the latest promotion regarding the local Boursa, plus some of its companies are listed in foreign indexes.
GCC Investors’ share out of total value of sold shares scored 5.3% (3.5% for the same period of 2017) worth KD 167.895 million, while value of purchased shares scored 5.2% (4.2% for the same period of 2017) worth KD 163.225 million, with the net sold trading value of KD 4.670 million.
The relative distribution among nationalities differed slightly from its predecessor. Kuwaitis occupied 78.1%, other nationalities occupied 16.6% and GCC traders’ share captured 5.3%, versus 87.7%, 8.4% and 3.8% for Kuwaitis, other nationalities and GCC traders respectively, for the same period of 2017. This means Boursa Kuwait remained domestic with most shares allocated to the local investors but their contribution is heading to a decrease. The non-Kuwaiti investors from outside the GCC outweighed that from within the GCC states, with the dominance of trading for individuals.
Number of active accounts between the end of December 2017 and the end of September 2018 dropped by -23%, compared with an increase by 16.8% between the end of December 2016 and the end of September 2017. Number of active accounts in the end of September 2018 scored 13,728 accounts or 3.56% of total accounts versus 13,743 accounts in the end of August 2018, 3.57% of total accounts for the same month, a decrease by -0.1% during September 2018.
Performance of Global Economy
IMF projections for global economic growth in its April 2018 report and October 2018 report indicate a reduction between this year 2018, and the upcoming year, 2019, with the April report having higher expectations of growth than the October report. For both years, the October report projected growth of 3.7%, instead of original projected growth of 3.9% in the April 2018 report, meaning that there is a reduction -0.2% for the two years. For advanced economies, the October report projects a 2.4% growth in 2018 and 2.1% in 2019, lowering its expectation by -0.1% in the two years. From the advanced economies, the IMF projects that the highest expected growth rates will occur in the USA, at 2.9% for 2018, and 2.5% for 2019, after it reduced the previous report’s projection by -0.2% based on fears of the consequences of the trade war.
The IMF also reduced projected growth in the Euro area, which lost about -0.4% between April’s growth projections of 2.4% for 2018 and October’s projection of 2%. The October report projection of 2019 dropped to 1.9%, instead of the April projection of 2%. Growth projections for the United Kingdom remained weak at 1.4% for 2018, a reduction of -0.2% from the previous April’s projections, while for growth projections in both reports for 2019 remained at 1.5%.
There were greater reductions in growth projections in the IMF’s April report, and its October report on emerging and developing economies. The October report expected their growth to be at 4.7% in both 2018 and in 2019. It should be noted that the IMF’s April projections expected growth to be at 4.9% for 2018 and 5.1% for 2019. In Latin America, the projected drop in economic growth affected the performance in the region’s most important economies, Argentina and Brazil, in addition to Mexico and North Latin America. This reduction continued to impact the Middle East region, particularly, Iran, and reached Europe and specifically, Turkey.
Although China and India continued to achieve high growth rates, China’s projected growth in 2018 was at 6.6% in both IMF reports, while in the April report was 6.4% and in the October report 6.2% for 2019. As for India, which currently has the highest growth rates in the world, it is projected to achieve 7.3% and 7.4% growth rates for 2018 and 2019 respectively, with a reduction of -0.1% and -0.4% respectively from the April’s report projections.
The highest reductions in growth projections between the April and October reports was in regards to the MENA region. Growth projections for 2018 was reduced from 3.2% in April’s report, to 2% in October’s report and from 3.6% for 2019 in April’s report to 2.5% in October’s report. Only the GCC states (5 out of the 6 GCC states) were projected to have an upward growth rates in the October report because of the high rise in oil prices. This will be addressed in more detail in a forthcoming report.
The Weekly Performance of
Boursa Kuwait
The performance of Boursa Kuwait for last week was mixed compared to the previous one where the traded value, traded volume, and the general index all showed a decrease, while the number of transactions increased. Al Shall Index (value weighted) closed at 423.7 points at the closing of last Thursday, showing a decrease by 3.9 point or by 0.9% compared with its level last week. While it increased by 36.7 points or by 9.5% compared with the end of 2017.