Kuwait Real Estate News
Kuwait realty sector has huge growth potential
The Kuwait Financial Center, Markaz, in its real estate report mentioned that it anticipates a huge growth potential in real estate and construction sectors in Kuwait, backed by the strong economic growth induced by rising oil prices.
The real estate and construction industry in Kuwait is expected to draw benefits from the $8bn worth of private investments and $3bn worth of government investments during the next five years, the report stipulated.
At the moment demand surpasses supply in all segments of Kuwait realty market, except in tourism and hospitality segments. The high land prices in Kuwait have had a negative impact on development, rendering new projects financially unfeasible. However, going further, we hope that Kuwait economy is heavily dependant on oil and gas sector. A sudden drop in oil price would have a negative impact on the economic outlook of the country. This, together with the geopolitical situation in the region could pose a serious threat to real estate sector in Kuwait, the report stated.
The residential sector private housing sub-segment has witnessed a considerable growth in demand during the past few years. There has been an average of about 7000 applicants for private housing each year during the period 2000-2006. The waiting list rate with PAHW has increased to 81.7 percent in 2006, as against 33.5 percent during 2004 and 47.8 percent during 2005. This indicates a situation of undersupply in the private housing sub-segment of Kuwait. We hope that the residential private housing market of Kuwait would continue to face a situation of undersupply in the medium term, the report mentioned.
In the meanwhile, according to Ministry of Public Works, about 70,000 units are likely to enter the market in the medium-term. The growth in demand for private housing units would continue due to scarcity of land in major governorates. According to the report, the demand for private housing units would touch 1,00,000 by 2010.
This scenario of demand surpassing supply has pushed rentals further over the past five years. The Isthithmari properties in outer city areas of Kuwait, such as, Jahra, Mahboola, Mangaf, Fahaheel and Kheitan depict a greater potential for returns. Cumulative growth in land values in inner city areas has exceeded 216 percent during the past ten years, as against the 167 percent for outer land areas, the report reveals.
As for the office segment, the strong economic growth in Kuwait has brought about a positive business environment in the country, by attracting participation from international companies in various sectors within the country. Due to the scarcity of office space, the prices and rents have grown rapidly. The office land rates continued to soar during mid and end of 2007, due to increased demand from local companies.
Increasing numbers of expatriate population and growing purchasing power are contributing retail consumption, thereby shaping the retail real estate market in Kuwait. There has been a trend towards development of huge malls. Going forward various mega malls are planned to be developed including the Mall of Kuwait and the Marina Mall extension. About 349,000 square meters of retail space is in the planning or construction phase and is expected to be ready by 2008.
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