Kuwait Real Estate News
Major drop in sales seen in Kuwait realty sector for second consecutive month
Kuwait witnessed a major decline in property sales for the second consecutive month, following the new government regulations in the sector.
As per official figures, the year-on-year sales during May dropped down 36%. Particularly, residential sales dropped from KD138.1m during May 2007 to KD50mn in May 2008.
The Kuwaiti government had introduced new legislations during the initial half of this year, so as to put an end to inflation. The Banks had been instructed to increase the required credit credential of potential lenders for various loans, including consumer loans and share purchases loans, and the loans for real estate purposes, in particular, was tightened. This led to a massive decline in demand for properties.
The total value of overall property deals in Kuwait dropped to KD146m on May this year, from KD229 during May 2007. The decline has however, been neutralized by strong growth in commercial property sales, which increased 66% touching KD19.5m, with a comparatively modest drop in property sales by 3.3%.
This downfall indicates that the high inflation prevailing in Kuwait at present is leaving maximum impact on Kuwaiti nationals. The residential property sales have seen a steep decline every-since the market peak during last July. The figures released by National Bank of Kuwait (NBK) for the month of April had showed a 60% drop in average house prices between the peak and February 2008. Next month’s year-on-year figures are expected to be worse.
The growing impact of high inflation in Kuwait is resulting in mounting tensions between the government and the recently elected parliament. The rental housing rates, standing at 16.1% is the most rapidly raising element in the consumer price index. In an effort to counteract this, parliament is considering a series of populist wage protection measures.
The latest report from NBK regarding the real estate sector in Kuwait has confirmed the prominence of high government spending in generating and sustaining the demand – or rather the “trickle down” effect. This process is highlighted even more in an economy such as Kuwait due to the vast percentage of domestic population being employed in government sector.
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