Real estate shows strong sales in major segments in Kuwait
Real estate data for July show sales rising by a very strong 72% year-on-year to KD 426 million. The strength of sales in July holds true even if we account for the fact that July saw 5 weeks’ worth of transactions (compared to 4 in a typical month). The robustness of sales was also not a mere basis or seasonal effect (owing to weak sales in July 2012 or Ramadan, for example): the monthly value of sales reached its highest for six years. Sales in the residential sector reached KD 191 million in July, a 35% y/y increase. Continuing its trend from previous months, the increase came on the back of a jump in the average transaction size, which went up 36% y/y, while the number of transactions was almost flat on the year.
The increase in the average transaction size was partially caused by some y/y increase in the average size of homes purchased in July 2013, but was mostly due to an increase in the average price per meter-square of both homes and plots. Note that due to the absence of detailed data, it is difficult to separate house price ‘inflation’ from price increases generated by ‘real’ factors, such as differences in the age of homes purchased, for example.
Investment sector sales totaled KD 176 million in July, almost double the amount seen a year earlier. In addition to a 22% increase in the average transaction size, strong sales in July were generated by a 63% y/y increase in the total number of transactions — stemming mostly from additional purchases of single apartments. Overall, transactions levels in the investment sector now look very strong, after a slow start to the year.
Commercial sector sales reached KD 59 million in July, their highest level so far this year. The commercial segment has been performing well this year, seeing large y/y gains in 6 out of 7 months of data. Transactions in July were a mix of purchases of complexes, shops, and plots of land. Though the recent trend of strong commercial sales might be partially attributed to an active role by the Kuwait Investment Authority, it could also be a signal of a private sector that is becoming more optimistic about the future economic outlook. The Savings and Credit Bank approved KD 36 million in loans during July, while disbursing a further KD 12 million. Both values were typical of this year, and did not seem to be affected by the onset of Ramadan in July. Also similar to recent trends, about two-thirds of approved loans were for new constructions, while loans for the purchase of existing structures were 12% of total — whereas they used to make up about a third of total loan applications in previous years. This makeup corresponds to the trend seen in residential sales, where in previous years the majority of purchases were of existing homes, but have now shifted towards buying plots of lands to construct new houses.
© Arab Times 2013, Sep 07 2013