Forgot your password?



Back to login

Kuwait property sales surge in early 2014
April 2, 2014, 6:40 pm
Share/Bookmark

While real estate sales in Kuwait exceeded $1bn in the first month of 2014, a shortage of housing at the lower end of the market continues to represent a challenge.

According to a recent report by the National Bank of Kuwait (NBK), property sales reached KD315m ($1.1bn) in January, marginally down on the previous month, but up 24% year-on-year (y-o-y).

Growth was driven primarily by activity in the investment sector, with monthly sales rising to KD141m ($500m), equivalent to an 88% increase y-o-y. The number of transactions hit 197, up 76% over the same month in 2013.

The majority of transactions were accounted for by individual apartments, followed by whole buildings (38%) and plots of land (6%). Investment properties are considered an alternative to the stock market and are largely made up of apartment complexes that cater to the expatriate population.

Meanwhile, in the residential sector, which reflects the housing demand of the Kuwaiti population, sales dropped 2% y-o-y, to hit KD142m ($503m). While the average sales value climbed by 46% in annual terms, the number of transactions fell 32% to 368, the lowest level since February 2013.

The rise in average value appears to have been driven at least in part by several large transactions, with three properties selling for KD2m ($7.1m) each. Sales in the residential sector are largely made up of land plots, which accounted for 60% of January’s transactions in this segment.

The balance of real estate sales were in the commercial segment, where nine properties where sold for a combined KD32.1m ($113.8m).

Re-positioning of state mortgage bank

In its report, the NBK noted state-owned Kuwait Credit Bank (formerly the Credit and Savings Bank) disbursed loans valued at KD15.1m ($53.5m) in January, up 45% y-o-y, while loan approvals reached KD27m ($95.7m), a rise of 79% over the same month in 2013. NBK attributed the rise in lending activity to an increase in land distribution by the government over the past year.

The name change for the Kuwait Credit Bank was announced in February. According to state news agency KUNA, the bank’s new strategy is focused on providing more mortgages to Kuwait families, as well as broadening the base of customers to include more women.

All Kuwaiti nationals are legally entitled to government-subsidised housing in the form of interest-free loans from the Kuwait Credit Bank, which can be used to finance the construction or purchase of new homes. In 2013 the amount of financing per residence available under this scheme was raised from KD70,000 ($250,012) to KD100,000 ($357,160), although this figure is still considerably below the average price of a villa.

The challenge of financing is compounded by the fact that under current legislation, only sharia-compliant institutions are permitted to provide mortgages, while personal loans have been limited by the central bank so as not to exceed 40 times the borrower’s monthly salary, with an upper limit of KD70,000 ($250,012).

Providing more low-cost housing

Despite these financing challenges, demand for residential stock has exceeded supply for the past two decades, resulting in a backlog of more than 100,000 units at the Public Authority of Housing Welfare as of 2012, according to a study carried out by the London School of Economics.

However, the state is well-aware of the problem and is taking steps to provide more low-cost housing to its citizens. On March 3, Minister of State for Housing Affairs Yasser Abul said the government was serious about addressing the housing shortage, saying that it would co-operate with the parliament to find a solution to what he described as a “very important issue”.

This was followed by remarks on March 10 by Minister of State for Cabinet Affairs Mohammed Abdullah Al Mubarak Al Sabah, who said the government, along with parliament, recognises the importance of resolving the issue. The state is committed to implementing projects and speeding up the planning process, he said, while speaking at the Kuwait Housing Conference. He suggested that the private sector could play a larger role, in part through the establishment of joint stock companies related to housing.

Share your views
CAPTCHA
 

"It is hard to fail, but it is worse never to have tried to succeed."

"Envy comes from wanting something that isn't yours. But grief comes from losing something you've already had."

Photo Gallery