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Corona crisis reverses rents trend

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Real Estate Union releases statistics

KUWAIT CITY, May 7: A number of real estate developers indicated that the corona crisis has reversed the course of rents, which was taking an upward trend after the 2008 crisis, due to demand from expatriates offset by the limited supply, reports Al-Rai daily. Statistics issued by the Real Estate Union, there were 381,000 units in 2018, 396.5 thousand units in 2019, and 397.7 thousand units in 2020, before declining to 396.1 thousand during April 2021, while vacant units increased by about 20% between 2017 and 2021 which means the rate in Kuwait was about 48.9 thousand apartments, which increased to 61,000 last year, at a rate of approximately 24.5%, and this increased in 2021 compared to 46,000 vacant apartments in 2019 with the departure of thousands of expatriates who lost their jobs due to the repercussions of the corona crisis and left the country, reports a local Arabic daily. With this large increase in the number of vacant units in Kuwait, many real estate owners were forced to reduce rents to maintain their tenants in light of the rapid changes that occurred in the market and led to the loss of the rental momentum that was in the past years.

Reduced
In a proactive step, some landlords have reduced rents between 10 and 30 percent, while others have resorted to offering exemptions to court tenants and try to prevent them from moving out to other units in light of a market in which the tenant has the upper hand, and his options are wider and cheaper. According to the Real Estate Union, the average rent price per square meter in various regions of Kuwait decreased to 4.47 dinars in April 2021, and is expected to reach 4.34 dinars this year, while the union confirmed that the occupancy rate in the investment sector will drop to 82 percent during 2022 and will improve to 85 percent. during 2024.

Real estate agents indicated that the decline in rents in Kuwait is difficult to happen except in cases of high rate of vacant units as happened during the corona crisis, stressing that modifying the demographic structure, liberating land, involving the private sector in real estate development operations, and building investment cities are factors that will have a great impact in deepening the decline in rents in the future. On the other hand, many people wonder about the factors that determine the rental value of investment apartments in Kuwait in the absence of a law that imposes on the lessor a certain value, or determines the justifications that allow the lessor to demand a specific value without the other.

Absence
Although the Kuwaiti Tenancy Law gives the landlord the right to demand an increase in rent after 5 years, many of the landlords did not demand it during the past two years, but rather fl irted with tenants with discounts and reductions in light of a wave of large evictions that affected the sector because large numbers of expatriates lost their jobs and left the country.

According to realtors the determinants of rental values, the principle of supply and demand is the criterion in this, as apartment rents vary from one region to another, in addition to the size and quality of finishes and services, which makes it more attractive than any other region. They indicated that the determination of apartment rents in Kuwait is left to the free market, and the agreement between the two parties to the contract, noting that there are no laws that obligate property owners with specific rental values, or a certain ceiling, as Kuwait is a capitalist country.

They pointed out that the rise in vacancies during the past two years and the departure of thousands of expatriates from the country reflected the rent index, which has been on the rise since after the 2008 crisis, due to the small size of the country and the large number of expatriates, which outweighed demand over supply. The latest statistics of the Real Estate Union indicated that there are 61 thousand vacant apartments in Kuwait, and the number of occupied apartments reached 335.1 thousand, constituting 84.6 percent of the total apartments.

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