Interview: Ahmad Kasem
How far might the continued growth of vacant apartments affect rental and building prices in the short to medium term?
AHMAD KASEM: The vacancy factor in Kuwait’s residential market is often overstated. A number of apartments are used as second homes or weekend getaways close to the city and beaches. There are also consistent vacancy levels in some smaller-sized properties which are traditionally rented by expats. This, however, is to be expected due to the changing manpower requirements in the oil and gas industries.
As evidence of the real balance in supply and demand, land prices remain high, as do construction prices. There are also changing demand dynamics in the market, with buyers looking for more modern designs and integrated community facilities in professionally managed complexes. The idea of managed communities is new in Kuwait, but buyers have been introduced to the advantages of this type of property in more mature markets and now want to see the same in their own country. Developers are already working with the government to provide a regulatory framework to enable homeowners associations and managed communities to exist, and this will transform Kuwait’s property market.
In which MENA markets do developers see the highest potential, and how will legislative advancements there boost foreign investment?
KASEM: The real estate industry in the Middle East is one of the fastest-growing sectors in the world, exhibiting high potential and countless investment opportunities. The UAE enjoys a very strong international profile and high foreign investment inflows. Egypt is another key market with high investment potential as well as tourism opportunities. The country has witnessed significant government investment in infrastructure and huge investments across all its property sectors. Legislative advancements in Turkey will significantly boost foreign investment there, especially considering that Turkey is a popular destination despite its current political and social unrest. The country has witnessed heavy investment from the GCC and is seen as a highly attractive market.
How much potential exists for increased use of the public-private partnership (PPP) model to develop residential and commercial real estate?
KASEM: The Kuwaiti government has adopted the PPP model to develop public infrastructure projects and introduce private capital and expertise into sectors otherwise under the government’s control. There is great potential to develop residential and commercial projects, which has been demonstrated by the number of new residential and commercial mega-developments being planned as part of urban renewal initiatives, particularly in the inner-city areas.
The PPP model can contribute a lot to urban planning and to the expansion and modernisation of infrastructure. Compared to other countries, the Kuwait government is more involved in PPPs, which allows the economy to expand and to introduce new integrated developments and infrastructure projects.
What measures can GCC governments take to mitigate the impact of continued economic uncertainty on the regional real estate market?
KASEM: No country in the region is immune to the impacts of the current economic situation, which is also affecting world markets. However, difficult times provide a positive catalyst to introduce new efficiencies and improve productivity. The Kuwaiti and GCC governments have taken steps to control deficits and mitigate negative impacts by investing in economic diversification. Governments are also focused on introducing regulations to streamline government services and attract new foreign investment designed to open up markets and grow a broader economy.
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