Rise in the real estate market liquidity

KUWAIT: The latest available data at the Ministry of Justice -the Real Estate Registration and Authentications Department- excluding crafts activity, parking lots and the coastal strip indicate rise in the real estate market liquidity during November 2015 by 63.1% vis-a-vis October 2015 liquidity. Total value of contracts and agencies trading scored KD 305.4 million versus KD 187.2 million but it dropped by 30.8% compared with November 2014 trading.

November 2015 trading was distributed between KD 298.5 million for contracts and about KD 6.9 million for agencies. Number of real estate deals struck in the month was 479 deals distributed between 459 contracts and 20 agencies. The highest share went to Ahmadi Governorate with real estate deals (218 deals) representing about 45.5% of the total number of deals, followed by Hawalli Governorate by 80 deals, representing approximately 16.7%, while the lowest share went to Jahra Governorate by 25 deals representing about 5.2%.

Value of private residential trading scored KD 99.5 million, up by about 30.4%, compared with KD 76.3 million for October 2015. Its contribution dropped to 32.6% of total value of real estate trading compared with 40.7% in October 2015. The monthly average value for private residence trading in 12 months scored about KD 129.7 million. This means that trading value in this month is lower by 23.3% compared with the average. Number of deals for this activity rose to 325 deals (245 deals in October 2015). Therefore, the average value per deal of private residence activity scored about KD 306.1 thousand.

Value of investment residence activity increased to KD 123.4 million, an increase by 73.4%, compared with KD 71.2 million in October 2015. Its percentage share out of total liquidity rose to about 40.4% versus 38% in October 2015. The average value for investment residence activity trading during 12 months scored KD 115.2 million, making value of this month trading higher by 7.1% than the 12 months average. Its deals scored 147 deals (94 deals in October 2015). As such, the average value per deal for the investment residence was about KD 839.6 thousand; higher by 10.9% than October 2015 average.

Commercial activity trading value rose to about KD 81.2 million, a rise by 135.7% compared with KD 34.5 million for October 2015. Its percentage share out of total real estate trading value increased to about 26.6% (18.4% in October 2015). Average value of commercial activity transactions in 12 months scored KD 37.6 million which means that trading value during this month was higher by about 116.2% than the 12 months’ average. Its transactions were 6 deals (9 deals in October 2015). Therefore, the average value of the commercial deal was at approximately KD 13.5 million. Value of warehousing trading activity was at approximately KD 1.25 million (one deal during November 2015).

When we compare November 2015 trading with November 2014, we note decline in the real estate market liquidity from about KD 441 million to KD 305.4 million, ie 30.8%, as we mentioned. The drop involved the private residential activity by 47.5% and the commercial activity liquidity by -39.4% while the investment residence activity rose by 5%. If liquidity rate continues at the same average rate in the past 11 months of 2015 total liquidity will score about KD 3.3 billion, which is less by -33.9% than 2014 which means sustained drop in the real estate market’s liquidity.

Bill to regulate agencies

In what seems to be completion of connected series of incomplete legislation, and the revoked ones, the Financial and Economic Affairs Committee in the National Assembly finalized a draft law to regulate commercial agencies. The project in our opinion is one step backward. Legislation originally tends to enhance the majority gains while the proposed project dedicates a monopolistic approach which impairs its legal legitimacy and contradicts the prevailing economic trend in the world calling for trade liberalization to the degree of globalizing of all its components.

In the past, the world passed through a legislation revolution to ensure alignment of legislation to the interests of the majority during which the social security network was established such as the adoption of the minimum wage limit, encouragement of establishing trade unions to defend the interests of the least privileged in their share in the decision-making power. This was achieved after the crisis of the Great Depression in 1929. Reform began in the most capitalist stronghold states, i.e. the United States the origin of the crisis.

The declared goal was to protect the society from the savage capitalism approach and its call to abolish legislation and to leaving the “invisible hand” to regulate the rights and obligations of business partners. The same approach has become prevalent in the world since its financial crisis in 2008. All capitalist countries have become more inclined to reduce the monopoly and imposed high governance controls on major institutions departments in a preventive protection to the vast majority affected by the crisis.

The proposed legislation by the Committee of Finance and Economic Affairs tends to overpower the interests of the agent on the client’s or consumer’s interests or the majority which will add an undue margin on prices at a time when the consumer income should be protected from erosion due to inflation coinciding with an era where the potentials to increase wages are scant. Articles such as limiting the import of goods to the country of origin only, or exempting the agent of their maintenance unless they are in accordance with its specifications, or limiting the agency to one company or one dealer, are just examples of consecration of the monopoly power to the agent. Other examples are plentiful.

The bank’s financial statements indicate that the bank’s total assets increased by KD 88 million, or by 14.8%, and scored about KD 682.8 million (KD 594.8 million in the end of 2014). And increased by about KD 175.6 million, or by 34.6%, when compared with KD 507.1 million in the same period of 2014. Item of financing receivables increased by KD 104.2 million, or by 26.9%, to KD 492.4 million (72.1% of total assets) compared with KD 388.2 million (65.3% of total assets) in the end of 2014.

It however increased by 42%, or by KD 145.6 million, compared with KD 346.7 million (68.4% of total assets) in the same period 2014. Item of placements with banks decreased by KD 31 million, or by 25.3%, to KD 91.5 million (13.4% of total assets) compared with KD 122.6 million (20.6% of total assets) in the end of 2014. It increased by 13%, i.e. KD 10.6 million compared with KD 81 million (16% of total assets) in the same period of 2014.

Figures indicate that the bank’s liabilities (without calculating total equities) increased by KD 87 million, or by 17.3%, and scored KD 590 million (KD 502.9 million in the end of 2014) and increased by KD 174.9 million, or by 42.2%, compared with the total in the same period last year. Percentage of financing receivables to total deposits scored 84.1% (84.2%). The ratio of the bank’s total liabilities to total assets scored 86.4% (81.8% in the same period last year).

Results of analyzing the bank’s financial statements calculated on annual basis indicate that all profitability indexes increased compared with the same period 2014. The return on average equities (ROE) increased to 1.8% (0.5%). The return on average capital (ROC) increased to 1.7% (0.4%). Likewise, return on average bank assets (ROA) increased to 0.3% (0.1%). (EPS) scored 1.3 fils versus 0.3 fils. (P/B) index scored 2.3 times (2.9 times).

Boubyan Bank Financial Results

Boubyan Bank announced its results for the first nine months of the current year ending on 30 September 2015, which indicate that the Bank’s profits -after tax deductions- scored about KD 25.2 million, a rise by KD 4.9 million, or by 24.1%, compared with KD 20.3 million for the same period 2014. The rise in net profits is attributed to the rise in total operating incomes by a higher value than the rise in total expenses.

In details, total operating incomes of the bank increased by KD 8.7 million, or by 14.9%, and scored about KD 67.1 million vis-a-vis KD 58.4 million for the same period 2014. This resulted from the rise in most of operations incomes components. Item of net financing incomes increased by KD 8.9 million to KD 57.9 million compared with KD 49 million. Likewise, item of net fees and commission income increased by KD 1.8 million to KD 6.3 million (KD 4.5 million). While the item of share in the results of associates decreased by KD 1.3 million to KD 509 thousand (KD 1.8 million). Total operating expenses increased by less value than the rise in total operating incomes, ie by KD 3.1 million, to KD 29.5 million(KD 26.4 million in September 2014), or by 11.7%. Due to the rise in all operational expenses components.

Percentage of total operational expenses to total operational incomes scored 44% (45.3% in the same period 2014). Total provision for impairment increased by KD 471 thousand to KD 11.3 million (KD 10.8 million), a rise by 4.4%. This explains the rise in the net profit margin to 37.5% (34.8% in the same period 2014). The bank’s financial statements indicate that total assets increased by KD 330.8 million, or by 12.5%, and scored KD 2.979 billion (KD 2.648 billion in the end of 2014). Also total assets increased by KD 467.9 million, or by 18.6%, compared with KD 2.511 billion in the same period 2014. Item of Islamic financing to customers increased by KD 302.4 million, or by 16.8%, to KD 2.108 billion (70.8% of total assets), compared to KD 1.805 billion (68.2% of total assets) in the end of 2014.

The item increased by 20.9%, ie about KD 363.9 million, compared with KD 1.744 billion (69.4% of total assets) in the same period of 2014. Figures indicate that the Bank’s liabilities (without calculating total equity) increased by KD 319.4 million to KD 2.666 billion (KD 2.347 billion in the end of 2014). These figures would be bigger if we compared total liabilities with the same period of last year as they would be increased by KD 447.3 million, or by 20.2%. When they scored KD 2.219 billion. Therefore, the ratio of the bank’s total liabilities to total assets rose to 89.5% up from 88.4% in of the same period last year. Percentage of Islamic financing to customers to total deposits scored 79.9% (79.6%).

Results of analyzing financial statements calculated on annual basis indicate that all the bank’s profitability indexes increased compared with same period 2014. The return on average equities relevant to the bank shareholder (ROE) increased to 11.1% (9.8%). Return on average capital (ROC) increased to 16.7% (14.2%). Likewise, the return on average assets (ROA) increased slightly to 1.19% (1.15%). (EPS) scored 12.2 fils (9.8 fils). (P/E) scored 24.9 times -improved- compared with 38.9 times, as a result of increased earning per share by about 24.5% and a drop in the market price of the share by 20.6% of its price level on 30 September 2014. (P/B) scored about 2.7 times, compared with about 3.4 times in the same period last year.

KSE Weekly Performance

The performance of Kuwait Stock Exchange (KSE) for the last week (4 working days due to Birthday Of Prophet Mohammad Holiday) was less active compared to the previous one, where all indexes showed a decrease, the traded value index, the traded volume index, the number of transactions index, and the general index also showed a decrease, AlShall Index (value weighted) closed at 365.4 points at the closing of last Wednesday, showing a decrease of about 1.2 points or about 0.3% compared with its level last week and it decreased by 78.6 points or about 17.7% compared with the end of 2014.