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Kuwait real estate sector set for recovery in 2012, bank report suggests

According to the latest GCC Economic Outlook report from the National Bank of Kuwait (NBK), the total value of purchases last year reached KD2.7 billion.

It says that there was a renewed interest in real estate among investors with that sector showing an increase of 53%. Residential increased 32% but the commercial sector under performed with just a 3% gain.

Residential sales accounted for 54% of the total sales, investment was 37% and the commercial sector 9%.This is similar to 2010 when sector shares were 55%, 33%, and 12% respectively.

Last year also saw an 11% increase in the total number of transactions, with most of the increase coming from residential property transactions.

‘The real estate sector recovered further in 2011, with special sustained interest in the investment sector, i.e. apartment buildings that generate income,’ it reported.

Loans to real estate also showed some improvement, up 4.8%, the report said, a further sign that the property market was looking up in the year ahead.

Sales activity in the real estate sector totalled KD161 million in December, a drop of 32% year on year. The report says that activity seems to have slowed down in the last month of 2011, but it is expected to pick up again in the months to come.

Residential sector sales were KD87.5 million for December, a 15.1% increase year on year. ‘This drop did not come from decreased activity in the sector, but from a smaller average transaction size, which dropped 17.7% year on year. This was due transactions being skewed toward land plots that month (finished homes are pricier than land plots). Overall, this sector has done well in 2011 and should continue to do so,’ the report says.

The investment sector, mainly apartments and buildings intended for rental, saw KD61.3 million in transactions for December, a 14% drop year on year. ‘The decline stemmed from a decrease in the number of transactions, which dropped 13% year on year. This slow down is likely to be temporary and activity in the sector should pick up in the months ahead, as investor interest remains high,’ the report adds.

The commercial sector saw four transactions in December totalling KD12 million, compared to a monthly average of KD 20.5 million in 2011. ‘This sector is usually volatile, due to the low number of monthly transactions and the large variation in the size of the properties involved,’ the report says.

Overall December saw a slowdown in activity that continued over from the previous month, despite a generally healthy year for the real estate sector. ‘Good demand in the biggest two real estate sectors should allow activity to pick up again in 2012,’ the report concludes.