The real estate market got off to a slow start in 2017, with a weak showing in February, though prices held their ground. An already weak market was not helped by a stock market rally since December 2016, which may have pushed some away from a weary real estate market. Still, February saw continued stabilization in prices across both the residential and the investment sectors. February sales were unusually weak, remaining well below the average monthly sales for 2016.
The value of sales decreased to KD 155 million, lagging last year’s performance by 40%, on the back of a significant slowdown in the commercial and investment sectors. This was despite a slight pickup in transaction volumes, which rose by 3% year-on-year (y/y). The residential sector saw somewhat more resilient activity, with sales hovering around the 2016 monthly average. February KD sales totaled KD 77.1 million on 227 transactions. KD sales and transactions were both slightly up at 1% and 3% y/y, respectively. Only a third of transactions involved land purchases, with a high concentration in Sabah Al-Ahmad Sea City, Fnaitees and Abu Ftaira.
These three areas have been of interest to homebuyers for more than five years. A surge in distributions of land plots by the government over the last two years might have exacerbated the slowdown in the residential sector. Although the rate of distribution is expected to slow to 4,770 plots during FY17/18, the Public Authority for Housing Welfare (PAHW) recently announced it plans to distribute 60,000 housing plots and units by 2019. While the bulk of these distributions are only on paper and applicants will not receive construction permits until road and infrastructure construction is completed, they can still have an impact on market activity.
According to a development plan follow-up report for 4Q16, work on South Mutlaa (30,000 plots) is only 12% complete and West Abdallah Al-Mubarak (5,201 plots) is at 34% completion. Residential real estate prices were steady, hinting to a possible residential market bottom. The NBK residential home price index stood at 152.4 point, up one point for the month. The index has been in the vicinity of 151-152 points for the seven months, though it is down 14.6% y/y. The residential land price index was flat in February at 182.1. This index, which is down 5.8% y/y, has remained relatively stable for ten months – National Bank of Kuwait