Govt’s spending on housing aims to trigger hike in real estate demand – Hotels, furnished apartments said to flourish
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KUWAIT CITY, Feb 4, (KUNA): Following recent recession in domestic development, government spending on housing and construction is forecast to trigger hike in the realty demand in Q1 2018.
It is also predicted that hotels and furnished apartments will flourish, in tandem with execution of government mega projects, namely development of Kuwait International Airport, expanding the Amiri Hospital, constructing Jaber causeway, Al- Jahraa and Jamal Abdulnasser roads, in addition to a number of private projects.
The local property market has been affected with unfavorable domestic and external factors, namely imbalance in supply and demand and maintaining a strict credit policy by the banks. Other factors have also left marks on the market; such as decline of proceeds from realty enterprise, capitals’ shifting to stock markets, unsteady oil prices, geopolitical events and increase of construction materials’ prices.
Moreover, the sector recent recession was attributed to increase of power, water and fuel rates. Nevertheless, experts believe that investment in the sector remains safe due to high proceeds, reaching in general eight percent. Last year, there were bids to stimulate the market; with auctions confined to selling land plots, however up to 20 auctions had to be delayed due to investors and auctioneers’ absence.
Realty experts, interviewed by KUNA, believe that some of the main factors affecting the market are shortage of promoted plots against high demand and rare investment alternatives. Rents in the investment and commercial sectors have recently dropped by 10-15 percent, they say.
Qais Al-Ghanim, Secretary of the Kuwaiti Real Estate Association, affirms that the market has remained largely in a lackluster status, with trades not exceeding seven percent of the displayed properties.
Some entrepreneurs have been shifting to the stock market, lured by instant profits. Suleiman Al-Dlaijan, manager of a property agency, says young citizens, who make up 60 percent of the 1.4 million Kuwaiti population, are number one trades’ seekers.
Up to 700,000 young Kuwaitis aspire to own a private house, but most of them cannot afford it. Figures by the Public Authority for Housing Welfare (PAHW) show that there are 100,000 residence applications per year. Twelve thousand residential units were distributed last year. Al-Dlaijan believes that hike in power, water bills; restrictions imposed by the Central Bank of Kuwait (CBK) on credits for private housing stemmed the high property prices.
As to trades’ value over the past three years, he said it amounted to KD 4.4 billion ($14.5 billion in 2014), KD 3.2 billion ($10.5 billion in 2015) but dropped in 2016 to KD 2.4 billion ($7.9 billion). Abulaziz Al-Dghaisheem, chairman of a realty group, believes that auctions have stimulated the market, however geopolitical factors’ negative impact are still noticeable. Director General of Athra Real Estate Company Maitham Al- Shakhs forecasts revival of the property market this year, amid predicted economic growth.
By Mohammad Kamal
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