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KUWAIT CITY, July 3: From time to time, the real estate sector witnesses a change in the attitudes of investors depending on the economic indicators and political conditions, and the resulting decisions that may negatively or positively affect the course of market activity, reports Al-Qabas daily.
There is no doubt that the investment sector in particular was the most affected during the past years due to the repercussions of the COVID-19 pandemic. It continued to suffer with the recent rise in the interest rates, in conjunction with the authorities’ tendency to address imbalances in the demographics, and the issuance of strict decisions on the category of expatriates – the main operator of this sector.
The news circulating about the resumption of the issuance of visas for the families of expatriate residents during the coming period brought a glimmer of hope among the real estate investors, with expectations that it would revive the sector to return to its status prior to the pandemic.
Real estate circles expect the decision to reopen “family visa” to constitute a breakthrough for the investment real estate market (apartments), which witnessed a decline in occupancy rates from their previous rates. It is expected to record about 85.5 percent in 2023, which is a decline from 89 percent prior to the pandemic.
The number of vacant units in the investment housing sector amounted to approximately 59,000 units, compared to 46,000 empty units in 2019. It is expected that the occupancy rates will gradually improve with the reissuance of family visas for expatriates.
The real estate community unanimously agreed that the authorities’ move to resume family visa issuance will reflect positively on the real estate market and the rental prices, which constitute investment revenues for many citizens who faced unusual crises due to the decline in demand and the accumulation of rents for tenants during the pandemic period.
The community stressed that the activity of the investment sector is closely linked to expatriates; therefore, the less stringent the decisions are for expatriates to bring their families from their home countries, the more the sector will flourish and vice versa. In the event of a decrease in the number of expatriates and their families, it must be matched by serious support from the authorities for the investment sector.
On the other hand, a number of real estate agents believe the suspension of family visa for expatriates is not the only reason that led to a decline in the apartment sector. They explained that there are other factors that directly contributed to the large number of vacant flats such as the increase in the investment construction activities in many areas of Kuwait such as Mahboula, Sabah Al-Salem, Mangaf and others, in addition to the increase in the rental rates in private housing areas, which led to an increase in supply and a decline in demand for investment real estate.
They indicated that the spread of the phenomenon of leasing in typical areas is mainly due to the high prices of land and construction, as the revenues achieved from leasing may be the most appropriate solution for the citizens to compensate for the exaggerated cost in prices.
Some real estate agents suggested that allowing expatriates to own apartments in Kuwait will revive the currently declining real estate sector and the investment apartments market, and relieve pressure on private housing rented to expatriates. This will in turn lead to reviving the construction sector, the building materials market and some national industries related to real estate, as well as revitalizing the economic movement in general.
Others believe that enabling expatriates to own housing units without liberating lands will crowd out Kuwaitis who are looking for housing for themselves, in light of the housing crisis that the country is suffering from. It will also raise the prices of investment real estate, which may lead to the inability of citizens with limited income to buy an apartment.
A real estate expert ruled out that the stagnation in the investment sector was caused by just a decline in the number of expatriate families.
He explained that the hikes in interest rates to curb inflation and the rise in land values, and the economic situation in general had greater repercussions on the sector. On the other hand, the extent of the impact on buildings remains directly related to the proportions of occupancy and return rates.
The local real estate market plays a prominent role in the national economy, due to which it is necessary to strengthen the hedging policy and protect the sector from the repercussions of inflation and new hikes in interest rates.
The investment real estate market is expected to improve during the next stage in the event that Kuwait witnesses more development projects that would need additional employment.
Furthermore, properties with finishes of medium and low quality witnessed an improvement in occupancy rates. According to real estate reports, these two categories represent 95 percent of the size of the local investment housing market. The occupancy rates in first-class properties showed stability during the past five years, but this category also witnessed a sharper decline in rents compared to the last two categories. This indicates that some families have moved from mid-grade properties to first-class properties due to the lower rents of the latter.
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