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Tuesday , January 21 2020

Residential sales pick up; prices remain soft

Activity in the real estate market improved ahead of the holy month of Ramadan and the summer season, amid benign macro conditions and enhanced consumer confidence in May. Real estate activity and KD sales picked up following a soft April, though sales continue to lag last year’s performance, with the exception of the commercial sector. Total sales totaled KD 1.1 billion year-to-date (ytd), down 22% from the same period last year. Meanwhile, NBK’s real estate price indices softened in May. Only the residential land price index managed to stay in positive territory, up 2.8% year-on-year (y/y).

Activity in the residential sector picked up again in May following a lull in April. The sector registered 278 transactions, up by 49% y/y, while KD sales soared to KD 112.8 million, up by 88% from a month ago.

However, the residential sector still lags last year’s transactions and KD sales, down 16% and 5%, respectively. With the transactions almost evenly split between plots and homes, 65% of the sold plots were in Funaites, Sabah al Ahmad Sea City and Abu Fteera.

Residential real estate prices cooled off further this month. The NBK residential home price index slid to 166.7 points in May, retreating by 8.5% y/y.

The NBK residential home price index has been trending downward since the beginning of 2015, when it peaked at 186 points in January 2015. May’s decline in residential home prices was not restricted to a few areas, but rather widespread across 23 out of the 57 areas included in the index; 20 residential areas exhibited price increases.

Similarly, the NBK residential land price index retreated in May; at 186.6 points, but the price index still logged a gain of 2.8% y/y. Land prices were the first to correct, back in 2015.

Strong apartment sales boosted transactions in the investment sector. Smaller single apartments (for investment) dominated activity. Apartment transactions represented 75% of total transactions. The shift in the composition of investment sector sales toward individual apartments, rather than buildings, pressured KD sales, which fell 45% y/y in May, while the number of transactions improved by 15.6% y/y.

The NBK investment-building price index retreated to December 2015 level, erasing earlier year-to-date gains. In May, the index stood at 211.2 points, down 1.4% y/y. The price gains were moderate between February and April of this year, keeping the price index above 210 points, slightly lower than the 2015 average of 215.6 points.

Following three months of strong activity, commercial sector sales cooled off in May though KD sales were up from the previous year. Sales for the month totaled KD 34.4 million, up 53% y/y.

This was on only nine transactions, almost double the number recorded during the same period last year. The largest transaction recorded was a commercial complex under construction in Salmiya for KD 10 million.

Kuwait Credit Bank (KCB) approved KD 18.9 million in loans in May. The value of approved loans during the month was down 7.5% y/y. Disbursed loans were almost flat y/y totaling KD 28.8 million. Loans approved or disbursed for new construction were down by 59% and 17% y/y, respectively.

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