Kuwait Times, Monday, Jan 25, 2021 | Jamadi Al Thani 12, 1442
Kuwait real estate market slowdown ‘to end by summer’
Kuwait:
The real estate market was adversely affected by the coronavirus
pandemic, especially commercial properties. But according to the Kuwait Real
Estate Association, the downturn is temporary and a return to growth is on the
horizon. Prior to the pandemic, according to data published by the association,
residential properties numbered 371,006 and investment properties 13,353. Based
on 2017 data, only 21,529 apartments were vacant, so the occupancy rate was 86.8
percent.
The average monthly rent at that time was KD 279 and after adjusting the
occupancy ratio, the effective monthly rental was KD 242. At that time, the
association expected the construction of an additional 875 buildings or an
additional 6.6 percent of apartments during the next two years (until 2020).
But even prior to the pandemic, there were lingering doubts about the property
market, and a slowdown in occupancy rate was seen due to the sharp drop in oil
prices on the international market. “The average monthly rental decreased to KD
278.9 in Q4 2017 from KD 313.2 in Q2 2015. This is a decline of 10.9 percent
over two years, an annual decline rate of 5.5 in monthly rentals,” the
association revealed.
Huge impact
Speaking to Kuwait Times, Ahmed Fares Al-Dowhees, Secretary General of the
Kuwait Real Estate Association, acknowledged the huge impact of the coronavirus
pandemic on Kuwait’s investment real estate sector, both commercial and
residential.
“During the first salvo of the pandemic, many were gravely affected, including
the real estate sector. The same situation goes for other countries as well.
Until now, some of the businesses are yet to recover, but this is the reality in
a crisis situation such as the pandemic. Many businesses have closed.
Restaurants, coffee shops, salons and health clubs were all affected, big and
small shops were closed including entertainment facilities for children, which
are yet to reopen. Tenants said they barely get anything from the businesses
they are in, so some had to close their companies,” Dowhees said.
“But thank God the government recommended several measures to cope with the
impact of this pandemic, including waiving rent and the suspension of repaying
loans to banks. Those recommendations floated by MPs at that time helped us a
lot to quickly overcome the immediate impact of the pandemic. Real estate owners
have given many of their tenants discounts, while some even waived two or three
months of rent to help renters cope,” he added.
Dowhees believes the slowdown is temporary and will come to an end at the
beginning of summer. “Vaccines have already rolled out in many countries around
the world and the majority of the population will be vaccinated by that time.
Besides, we have been through many trials – this scenario is very familiar to
many of us in Kuwait. We have overcome several challenges, from the Al-Manakh
stock market crash to the invasion of Kuwait (by the Iraqis) and the Gulf War,
but we were able to rise up from these crises,” Dowhees said.
“I believe this crisis is temporary too and will come to an end very soon. We
will return to normal in a matter of months, inshallah, and we will be as strong
as before – mark my words. Many commercial establishments were unable to cope
and closed their shops temporarily; many were out of jobs. But if you notice
now, we are almost back to normal,” he added.
Asked if there is an oversupply of apartments in Kuwait currently, Dowhees said
the market is rebalancing. “There is supply and there are tenants too. People
are moving from one flat to another because some flats have now reduced their
rent by up to 20 percent. This is normal. People will move from one place to
another, whether we like it or not. That is why in order to avoid losing their
tenants, building owners should lower the rent as well,” he said.
Expats’ numbers
According to Dowhees, the Kuwait Real Estate Association is against government
efforts to reduce the number of expatriates in the country. “Such moves will
drastically affect the real estate situation in the country. We need expats to
work for us and help us recover from the onslaught of the pandemic. Besides, we
have several plans for Kuwait’s 2035 vision. We need housing projects. We need
to build new cities. We have the Silk City project, for example. Who will help
us build these projects? Who will help us run related businesses? In fact we
need more of them [expatriate labor],” asserted Dowhees.
“UAE and Qatar continuously host expats to help their economies. We are not
unique from these countries. They rely on expats and I believe Kuwait is a great
and generous country for expats too,” he added. “But on a personal note, I agree
with the government’s decision to let go of expats over 60, but only if they
have no families here. If they have families, they need to reconsider this
decision. What we want them to look into is the fact that 20 expats have to live
in one apartment – this is dangerous and unhealthy.”
In mid-2020, Ibrahim Al-Muhaini of Al-Muhaini Real Estate Center admitted that
real estate rentals were gravely impacted by the departure of expatriates.
Nearly a quarter million expats have left the country after losing their jobs
due to the pandemic, and according to estimates, this figure could rise to
almost one million, Al-Rai Arabic daily reported. “I don’t think that many
expats have left. A few thousands for sure, but not more than 100,000; maybe
67,000 only,” Muhaini said.
The Kuwait Real Estate Association was established in 1990 to act as an umbrella
organization for the real estate owners to represent their common interests in
the business community and oversee the rights of the real estate sector in the
country. It was founded by late Sheikh Nasser Saud Al-Sabah, who exerted a lot
of efforts to create the group.