Kuwait real estate market faces sectoral disparities

KUWAIT CITY, Feb 18: Investor sentiments in the real estate market are subject to various economic, social, and political factors, both locally and regionally. Recent years have seen significant shifts in the growth and activity of different sectors within the real estate market, reports AlJarida daily.

While the residential and industrial sectors have flourished, the investment sector has experienced stagnation and declining occupancy rates and prices.

Despite these challenges, the residential sector remains a significant contributor to the real estate market, albeit with a declining share of overall market liquidity. Positive expectations for the revival of investment real estate, as indicated by the National Bank of Kuwait, underscore the dynamic and evolving nature of the real estate market.

Several factors have contributed to the decline in demand for investment real estate. These include increases in electricity and water tariffs in 2017, along with stricter regulations on entry visas and visit cards for expatriate workers’ families, who are significant players in this sector.

Additionally, changes in demographic composition and government policies aimed at protecting residential real estate from speculation and land monopoly have further dampened demand in the investment sector.

As a result, many investors have redirected their focus towards the residential sector, which has seen significant price increases in recent years, especially after being exempted from electricity and water tariff hikes. However, recent legislative measures aimed at curbing speculation and facilitating housing construction for eligible citizens have renewed interest in investment real estate.

Government initiatives such as abolishing real estate agencies, preventing land monopoly, and imposing annual fees on large landowners have contributed to the resurgence of demand in the investment sector. Moreover, proposed amendments to residency laws may stimulate demand among expatriates, who comprise the majority of residential apartment users.

The revival of the investment sector is expected to exert pressure on residential real estate prices. Unlike residential properties, investment real estate offers advantages such as company registration, mortgage eligibility, and bank financing, making it an attractive option for investors.

Several factors have contributed to the pressure on residential real estate prices, including unprecedented price levels, which have diminished the purchasing power of many citizens. Housing regulations and rising interest rates on loans have also impacted residential real estate prices and liquidity.