There is considerable confusion over how well the market is doing with newly published official figures showing sales increased 8.6% in the 12 months to the end of August but an independent report describing the sector as ‘stagnant’ having suffered price falls of 40% in the last nine months.
The official figures show that property sales in the Gulf Arab state rose $337.2 million and the biggest improvement was residential property deals which were up 31.2% compared to August 2008.
Property sales, especially residential units, had been falling since the government placed restrictions in 2008 barring private firms from trading in existing houses to prevent unjustified increases in prices.
The new figures seem to show that is changing.
‘The combination of a steadily improving economic backdrop and easier financing conditions should help the real estate market to push of historic lows.
We look for property market activity to strengthen further in 2010,’ said a research note from the National Bank of Kuwait.
In particular it points to the potential impact of a recent legal ruling which will allow Islamic financial institutions to trade residential property.
Islamic lender Kuwait Finance House won a verdict against the ministry of justice which will open the way for it to finance private real estate investments.
But a new report from Al-Mutakhasses Real Estate Company says that real estate prices in Kuwait have reached an ‘intolerable’ level with demand for homes lower than this time last year. It adds that there will be no short-term recovery.
According to Faraj Al-Khudhari, company chairman, the government needs to provide the stagnant property market with incentives to boost the sector.
The report says that many entrepreneurs had limited their activity to monitoring the market rather than buying and it predicts that transactions will drop further for the rest of the year.
He said property prices had dropped 40% over the past nine months, compared to rates of the past three years.
‘A year after the start of the international financial meltdown property prices have reached an intolerable phase where they almost equalled the cost rates’, he added.
