Real Estate

Real estate sector in Kuwait plays a significant role in the national economy. The growth in this sector is an indicator on the development and growth of the economy.

The citizens of Kuwait have long ago explored this sector, especially after the discovery of the oil. The Kuwaiti people have realized long ago, the significance of the real estate sector as a secured shelter from fluctuations of life. Real estate participation in the Gross National Product amounted KD 911 millions as of 2003, which represents 7,3% from Gross National Product

Local real estate market witnessed as significant development in the level of trading and liquidity. Trading transactions amounted KD 2.758 Billions as at the end of 2004, thus representing a slight decline 2.5% compared to 2003. Accordingly, the real estate market recorded another distinguished year of real estate liquidity after the year 2002. Real estate trading amounted KD 2.284 Billion in 2002 compared to K 2.2828 Billion in 2003. The real estate sector would continue its activity in 2005 but at lower levels than 2002 and 2003.

Real estate, market deal analysis showed that the housing sector is considered as the central nerve of this market deals, supported by the nature of the country’s population and the availability of a housing system that provides suitable accommodation. Public Housing Authority database shows that there are nearly 60 thousand applications on the waiting list. This sector represents minimum 30% from total market activity followed by the commercial and industrial sectors with 3% from the total market share.

Credit facilities provided by the Banks to this sector amounted KD 2.4 Billion including the construction sector which represents 25% of the total credit facilities granted by local banks to all economic sectors in the country.

The main factors which have contributed to the growth of the real estate activity during 2003 & 2004 are as follows:

  1. Announcement and incorporated of several real estate investment companies and fund
  2. Security and political stability
  3. Repatriation of funds due to September events
  4. Compensation amounted paid to individuals and companies for the Iraqi invasion losses and reinvestment of such funds in real estates.
  5. High investment returns on real estate
  6. Innovations and development in leasing (Ijara) products
  7. Amendments adopted by Kuwait municipality such as the increase in construction rates.

However, despite the support and activity factor In the real estate market yet the local real estate may be impacted by continued rise in the discount rate (interest) determined by the Central Bank of Kuwait during 2005, in addition to certain decline in prices following the last three years in which prices witnessed a rapid increase.

Residential real estate sector will continue at the same level and decline (if any) would be very slight. This can be mainly attributed to the support resulting from the natural need of Kuwaiti population from this sector and the activities of the saving and credit bank. This activity will remain the axial point of the local real estate market.

Meanwhile, the investment sector will remain the most affected sector following the rubout in real estate sector. Commercial sector shall maintain its position in the coming years due to the significant demand for business offices by the private sector. Commercial offices witnessed a rapid increase, development and expansion recently.

In general, the real estate market shall witness a fluctuation in the volume of deals due certain real estate market factors in 2005. This was clearly evident in the real estate readings in January and February 2005. February witnessed a decline in deal volume compared to the preceding month. Major decline was witnessed by the investment sector compared to the preceding month.

It worth mentioning that the real estate market shall witness as unusual activity in the fields of construction and building as per the reconstruction activity which the country is witnessing, namely in infrastructure projects. The unusual activity in the real estate market can also be attributed to the extraordinary surplus expected to be realized by the State budget in light of the increase in international oil prices