Two things have recently happened within Kuwait in order to cause a sharp increase in the demand for property within the country that is naturally rich because of the oil stores available within the borders. The first of those things was a decision by the Kuwaiti government to reduce income tax charges on foreign investors from 55% to 15%.
This gigantic decrease in income tax rates combined with the fact that Kuwait is a somewhat natural choice for a property boom (given the richness of the state, the weather and the fact that it is already near a number of other booming property markets within the Middle East) resulted in an explosion of foreign capital into the country’s economy this has created a large amount of liquidity within the country that has begun to power the real estate market and causes property values to sharply increase.
The downside to this however is the same downside that has been experienced in other places within the Middle East, namely the idea that as demand increases and supply lags behind, rental prices and overall property values inflate to a point that many renters in the area begin to find unacceptable. In September of last year the inflation rate was 6.2% over the course of the year and that has only begun to accelerate with the lowering of taxes and the injection of capital into the country’s real estate market.
The government is planning to do two things in order to try and help the situation. The first is to increase the pay of many of the public sector employees and the second is to make more properties available over the course of 2008. Of course, if salaries increase without the increased supply, then it is very possible that the inflation in the Kuwaiti property market could get worse as time goes on.
