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Real estate sales in Kuwait rebounded in February, following a slowdown in recent months, with commercial sales outpacing residential for the first time in eight years.
According to a report published by the National Bank of Kuwait (NBK) in March, total sales reached KD261m ($865m) in February, a 17% year-on-year (y-o-y) increase and up 22% over January.
Lending is also on the rise as the government moves to accelerate its delivery of 174,000 new residential units for Kuwaiti nationals.
The construction of the new units is expected to extend benefits to private construction contractors wishing to bid on the residential projects.
Properties boost recovery
Sales figures indicate the investment and commercial segments performed especially well in February.
Investment property sales rose by 5.8% y-o-y to KD93.9m ($311m), while sales volumes increased by 65%, indicating a move towards smaller-ticket investment apartments, according to the NBK.
Although investors appear more cautious as a result of market volatility, prices in the investment segment are on the rise. Following three months of contraction, the state’s investment building index rose by 2.3% y-o-y in February to hit 220.8 points.
Commercial sales, meanwhile, surpassed residential sales for the first time in nearly a decade in February to reach KD90m ($298m), more than tripling the KD27.8m ($92m) recorded in January.
Fourteen transactions took place over the month, three of which were in Sabah Al Ahmed Sea City and were worth a total of KD69.7m ($231m), while another large transaction took place in the coastal area of Fahaheel, valued at around KD4m ($13m).
New plots and lending
While activity in the commercial sphere was strong, the residential segment posted weaker results, with sales declining by 28% y-o-y in February to KD76.7m ($254m) and the number of transactions down 29% to 221. This represented the lowest number of transactions ever recorded for the month of February.
Real estate price indices, however, have reflected more balanced results. The residential home price index lost just 2% of its value y-o-y in February to stand at 180.2 points, an improvement from January’s 178.3 points.
The development of government-subsidised greenfield housing projects are thought to be weighing on unit sales in the residential segment, NBK noted, with the government’s commitment to distributing 12,000 new plots of land every year seen as discouraging potential homeowners from buying existing residential properties.
Although residential unit prices were down, land costs have risen, with the residential land price index increasing by 3.7% y-o-y in February to 185.1 points.
National housing benefits
Kuwaiti nationals are legally entitled to government-subsidised housing after marriage, although the state’s backlog of housing applications reached more than 100,000 by January 2014, according to the Public Authority for Housing Welfare. To address this, in March 2013 the government announced plans to build 174,000 new housing units for Kuwaiti citizens by 2020.
Progress on some developments has been promising. In November the parliamentary housing commission unveiled studies concerning the dispersal of new residential units in the area, after delivering 12,000 new units in 2015.
According to the commission, there were an additional 11,139 housing receipts for land plots ready for delivery to waitlisted applicants, with the 12,000 citizens who recently received their plots expected to take possession of completed units in 2018.
Construction tenders for the project are set to be released in December of this year, creating new opportunities for private investment. In one recently released request for proposals for houses in South Al Mutlaa, for example, the prequalification documents specified that companies applying for the work must be international contractors.
Lending at Kuwait Credit Bank (KCB), which provides home-building loans and mortgages to Kuwaiti nationals, has been on the rise as a result.
KCB lending jumped by 51% y-o-y in February to hit KD23m ($76m), NBK reported. Approved loans for new construction, meanwhile, rose by 39.3% month-on-month and 29.7% y-o-y in February to reach KD15.2m ($50m), equivalent to close to two-thirds of all loans dispersed that month.