Last year saw a record high in real estate sales, which surged 18.5% year-on-year (y-o-y) to KD4.3bn ($14.3bn). Sales in the investment segment rose 30% to a value of KD1.8bn ($6.0bn), while residential sales increased 5% to KD1.9bn ($6.3bn).
In the 12-month period, the number of transactions dropped 6% to 5803, highlighting a shortage of residential property in some sought-after areas such as the Ahmadi, Capital and Mubarak Al Kabeer governorates, according to a National Bank of Kuwait (NBK) report.
Sales tapered off at the end of 2014, falling 11% y-o-y to KD355m ($1.2bn) in December, with the decline attributed to underperformance in the investment sector, with sales dropping 35% to KD134m ($445m). Despite the slowdown, sales in the residential sector continued their robust performance, growing 16.5% y-o-y to KD181m ($601m).
Weak start to year
Weak investor sentiment continued into 2015, according to NBK. Real estate sales fell 17% y-o-y in February for the third month in a row to reach KD221m ($730m), the lowest figure in two years. The residential and investment sectors were sluggish during the month, while the commercial sector trailed further behind in terms of sales value and number of transactions.
In its monthly report on the real estate sector, NBK attributed the drop in sales to seasonality factors as well as a correction amongst the investment sector. “The sector has been going through a slight correction of late, with investors more cautious because of higher prices and rich valuations according to anecdotal evidence,” said the report. “The short nature of the month and the coinciding National and Liberation Day holidays pushed the number of transactions further down”.
However despite a weaker start to the year, and a cloudier economic outlook due to depressed global oil prices, investor confidence remains upbeat in the real estate market as evidenced by the recent announcement of a new $700m project in the popular Sabah Al Ahmed Sea City.
Waiting list for houses
Residential property remains in short supply across the country, despite government efforts to deliver thousands of affordable housing units. The waiting list for units stood at over 100,000 in 2014 according to official data. The government has committed to solving the housing problem with the Public Authority for Housing and Welfare (PAHW) pledging to distribute 12,000 residential units to citizens this year, continuing on an annual basis moving forward. At the same time, land is being prioritised for the construction of new housing.
In a move to reduce the backlog, the PAHW has also increased the number of housing loans approved and disbursed.
Kuwait Credit Bank (KCB), the state’s main mortgage lender, approved over 5000 loans in 2014 with the value of total disbursed loans increasing 43% y-o-y to reach KD205m ($681m), and this is expected to maintain momentum in 2015.
Major investment announced
Recent developments indicate that the real estate sector remains attractive to developers and investors. In March, Kuwaiti property developer Tamdeen Group announced plans to invest $700m in a new commercial and residential complex, one of the largest private-sector projects ever unveiled in Kuwait. Spanning 350,000 sq m of waterfront in Sabah Al Ahmed Sea City, the project will include a shopping mall, three residential towers, a resort-style hotel and a marina accommodating over 900 boats, according to the group.
Tamdeen, which has $2bn of projects in the pipeline, has not announced when it expects to complete the work. Group chairman Mohammed Jassim Khalid Al Marzouq said the company would use a combination of its own funds and external financing to fund the project.
Other projects currently under development include the $94bn Silk City project, which will offer over 700,000 housing units, as well as a planned port, shopping centres, entertainment complexes and commercial offices. The project is expected to be constructed in phases over the next 25 years. The Sheikh Jaber Causeway, which will link Kuwait to Silk City, is already under construction and is on track for completion in 2018 according to SSH Design, which is managing the project.