Kuwait Real Estate News
Kuwait property sector leveling out
Kuwait property sector has had a rough ride, just as its counterparts elsewhere in the region. But, recently there are indications about the market having attained stability, and signs of a modest rebounding may not be far away.
As per the report issued in early June by the Ministry of Justice (MoJ), there was an 8 percent increase in sales value in April, compared to the previous month. Deals worth $333.25 were recorded. Although, the year-on-year total for sales registered was 42.6 percent, down in terms of transactions, and 53 percent lower in value, the April results does indicate that the sector is beginning to hold back some of its lost ground.
The recovery was mainly due to increase in sale of commercial properties by 51 percent, during the month, while apartment sales climbed 13 percent. Although residential properties saw a decline of 8 percent, the drop was still much better when compared to 35 percent drop in month-on-month values.
According to MoJ, more than half the transactions in the residential sector were for existing homes, rather than those under construction.
The mixed results in April suggest that although the market is stabilizing, it is being driven by demand, rather than supply. Although the economic crisis has had an impact on the sector, the downturn is in no means uniform.
The impact of crisis has been felt more by the high-class developments, while the mid-level developments have been left untouched, said Rawaf Bourisili, General Manager, Action Real Estate.
People are hesitant to sell properties at lower rates, while developers are hesitant to invest. This hesitancy is likely to improve with the improvement in Kuwait’s economy.
Although the ongoing crisis has had an immediate impact on the sector, the real estate sector in Kuwait is also facing some structural problems, which needs to be addressed for the industry to thrive, says Bourisili.
Another factor responsible for the slowdown of real estate sector was the effort by the State to bring down mounting housing costs. The new regulations introduced in March 2008, prevented private firms from purchase and sale of housing units, a move intended to reduce speculation and cool inflationary pressure in the property sector.
Though the laws achieved their objective, they did leave their impact on the market, agreed Mohammed Abdul Moneim, General Manager, Iskan.
Although the regulations still continue, Kuwait has taken some measures to boost the market. For instance, during mid-May 2009, the Central Bank of Kuwait announced reduction in interest rates.
Although it will take some time for these reductions to show its results and generate demand for credit, the moderate increase in activity in real estate sector, is a sure sign that confidence is returning to the market, although, with a certain degree of caution.
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