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Kuwait’s residential real estate market sees a decline in 2023 transactions

Kuwait International Bank (KIB) report highlighted a 30.3% decrease in residential real estate transactions in 2023

Kuwait’s residential real estate market sees a decline in 2023 transactions

According to the Kuwait International Bank (KIB) report, the residential real estate market in Kuwait experienced a decline in transactions in 2023. The number of deals dropped to 3,039, with a total worth of 1.2 billion dinars, marking a 30.3% decrease compared to 2022, which saw 4,362 deals worth 1.9 billion dinars. These figures are based on real estate registration statistics from the Ministry of Justice website.

The report highlighted that a significant reason for the decrease in trade was the Central Bank’s higher discount rate. This resulted in reduced economic feasibility for investing in income-generating residential properties and increased financing costs for construction, coinciding with rising construction expenses, particularly labour wages.

The report further stated, “Given the state’s general direction and forthcoming laws in Kuwait, which prioritise land liberation and redirecting capital from the residential sector to other areas, such as abolishing real estate agencies and preventing land monopolies through the imposition of annual fees of 10 dinars per square meter exceeding 1,500 square metres.”

“Additionally, there is a move towards imposing electricity and water charges on owners of multiple residential properties. These factors will likely drive investment towards the operational investment housing sector, placing pressure on residential sector prices and contributing to increased supply and decreased demand,” the report added.

The report also mentioned that prices declined at the end of 2023 by 12%-15% compared to 2022, especially for areas relatively distant from the Capital Governorate.

In contrast, areas close to it experienced a slight decline in prices, except for distinguished locations, which saw relative stability.

On the other hand, the report mentioned a decline in real estate transactions in private residential areas, particularly in Al-Ahmadi Governorate, which saw a 42% decrease compared to the previous year. The area with the sharpest drop in transactions was noted to be the Sabah Al-Ahmad Marine region, in contrast to 2022.

The primary reason cited was the initial surge caused by the COVID-19 pandemic, which turned the region into an attractive investment opportunity with high returns. However, as returns normalised and decreased afterwards, demand for the area began to decline.

The report concluded, “The number of registered contracts in the private housing sector this year totalled approximately 3,039, marking a 30.3% decrease. This indicator suggests a price decline, along with a decrease in transactions across other real estate segments.”