Kuwait's real estate market saw a decrease in sales during the first half of 2023. Kuwait Financial Centre "Markaz" released a report titled "Markaz's Real Estate Sector Outlook for H2-2023", highlighting this trend.
This report uncovered that the total real estate sales for the first six months dropped to KD1.5 billion ($5.1 billion), down from KD1.9 billion ($6.5 billion) in the previous year. This decline is mainly due to high property prices in the residential sector and higher interest rates, which reduced lending.
Yet the report also noted the key factors of non-oil GDP growth, and rising house prices. These factors may offset weaker demand in Kuwait's corporate commercial sector.
RESIDENTIAL SALES AND TRANSACTIONS DECLINE
In the residential sector, sales in the first half of the year fell to KD736 million ($2.4 billion) compared to KD1.013 billion ($3.3 billion) in the same period of 2022. The number of transactions also saw a notable drop of 38% year-on-year in H1 2023.
RENTAL SEGMENT FACES DECLINE
Kuwait's housing rental market, experienced a 21% year-on-year decline, reaching KD458 million ($1.5 billion) in H1 2023. The slower recovery in rental markets contributed to this decline, according to the Markaz report.
COMMERCIAL SECTOR SALES DECREASE
Sales in the commercial sector also fell, declining by 46% year-on-year in H1 2023 to KD210 million ($684 million), compared to KD387 million ($1.3 billion) in H1 2022. This decline indicates weaker demand in Kuwait's commercial real estate sector.
ECONOMIC OUTLOOK FOR KUWAIT
Markaz's report states that Kuwait's economic growth will fall to 0.9% in 2023, down from the previous year's 8.2%. This is primarily attributed to reduced output from the oil sector. Anticipated poor demand for oil due to a global economic slowdown and OPEC+ supply cuts are likely to contribute to the deceleration in Kuwait's real oil GDP growth.
NON-OIL GDP GROWTH AND RECOVERY
Yet, the non-oil GDP is projected to grow by 3.4% in 2023. This growth is supported by government stimulus measures and the recovery in employment levels of expatriates. The report also highlights that Kuwait's rental sector has experienced a gradual recovery since September 2021, driven by an increase in the expat population after the COVID-19 pandemic.
RISING HOUSING PRICES
The report notes a rise in housing prices from 1.44% year-on-year at the end of 2022 to 3.23% year-on-year in June 2023. Housing rents played a significant role in this increase, rising by 3.61% year-on-year in June, up from 1.51% year-on-year at the end of 2022.
A CHALLENGING PERIOD FOR KUWAIT’S REAL ESTATE MARKET
Kuwait's real estate market is navigating through a challenging period. Yet it's not all bad news. The ability of Kuwait to adapt and capitalise on potential growth in its non-oil sectors offers a promising route for recovery. So, as the country continues to diversify its economy and stimulate demand, this may play a strong role in shaping the future landscape of Kuwait's real estate market.
