Home ownership has been on the rise in Kuwait, as the government has begun to deal with a house-building bottleneck that has locked many married couples out of the market. For Kuwait citizens a house was a birthright redeemed upon marriage. With 103,000 couples on the waiting list for a free government home in 2016, delays in government house-building schemes meant that many newlyweds could expect to wait until their 15th wedding anniversary for their dream of a family home to materialise. In 2013 and 2014 real estate prices surged as supply failed to keep up with demand. However, in 2015 and 2016, as the bottleneck began to ease there has been a correction in the market, with real estate transactions at their lowest ebb for six years.
The concept of the state distributing some of its oil wealth to citizens through gifts of houses or plots of land has evolved over 60 years, and has become a cornerstone of the social contract between the government and its people. For young couples, housing has become a source of frustration, with successive governments failing to deliver on their side of the contract by building homes. The result was that many young Kuwaiti families were left to pay expensive rent until their number came up in the government house list, and with average house prices equivalent to almost 10 years of full salary many had no hope of buying a property independently in the meantime.
In January 2014 a new minister of housing, Yasser Hassan Abul, was appointed with responsibility for the Public Authority for Housing Welfare (PAHW), the agency tasked with distributing property to citizens. In the same year the National Development Plan for 2015-20 was unveiled, which included a pledge to reduce the housing waiting list. In 2015, 15,240 plots, homes and apartments were distributed, followed by 12,000 in 2016. Signs indicate that developments such as South Saad Al Abdallah, Sabah Al Ahmad and Khairan will see tens of thousands of plots and properties handed over between 2017 and 2020.
This surge in supply is seen as one of the main contributing factors behind a softening in market prices. According to National Bank Kuwait (NBK), in 2016 residential sector sales totalled KD944m ($3.1bn), down 31% on the previous year, and the number of transactions fell by 27% to 2847. NBK noted that land sales were concentrated in three areas: Sabah Al Ahmad Sea City, the huge resort being built in the south of the country, Funaitees and Abu Fatira. Among the most popular areas for sales of completed homes were Saad Al-Abdullah, Salwa, Firdous, Sabah Al Ahmad and Jabriya. When the monthly average in 2015 and 2016 is compared, NBK’s data shows residential property sales fell from KD113.4m ($375.1m) to KD79m ($261.3m), with the number of transactions down from 323 to 237, and the average price softening from KD352,000 ($1.16m) to KD332,000 ($1.09m).
In January 2017 the downward trend continued for both sales value and volume of transactions, down 13% and 4%, respectively, according to NBK’s analysis of Ministry of Justice data. A third of the KD78.4m ($259.4m) sales were for land, with a high concentration in Sabah Al Ahmad Sea City, Funaitees and Abu Fatira.
In addition to the increase in supply of government property, NBK’s report suggests investment sentiment in 2016 may have been adversely affected by volatility in oil prices and the government’s fiscal deficit – issues which were mirrored in other GCC real estate markets during the year. NBK’s residential house price index in Kuwait peaked at 186 in January 2015, but by December 2016 it had retreated to 152.4. In Dubai, the Bank of International Settlement residential property index peaked in October 2014 but fell by 12% within a year. The BIS index for Abu Dhabi peaked in November 2014 but only fell 4%. The Qatar index was the last to peak in November 2015, but fell by 15% in September 2016. Although property markets in the Gulf may have become more bearish, the property-owning prospects of Kuwaiti citizens are looking up.