“The First Rawaj Real Estate Forum” on Monday, June 22nd, 2009, which brought together some 80 specialists in real estate and real estate investments, as well as the participation of 53 listed and non-listed Kuwaiti companies.
Topics in the forum revolved around many aspects of development in the local real estate market as well as ideas to meet the challenges of the crisis. The effects of the crisis were discussed on four main fronts: real estate products, pricing, sales channels, and means of promotion.
In the beginning of the forum, Ayman Al-Harami, General Manager of Rawaj, emphasized that the state of the crisis-bound market has a negative impact on the ability of companies to market real estate projects, whether for both investor and beneficiary. He added that the negative impact also reflected on real estate marketing tools such as portfolios and funds.
On his part, President of the Real Estate Union, Toufic Al-Jarrah stated that the discussion of real estate marketing cannot be separated from the discussion of real estate itself, and if the product is affected, there is no doubt that the market will be affected, pointing out that the real estate sector is one of the most important sectors in Kuwait and the region, and its contribution to the total gross domestic product is evident and concrete.
The contribution of the real estate sector in the State of Kuwait and the Kingdom of Saudi Arabia is 7%, the Sultanate of Oman 6%, and the State of Qatar 10%, noting that the ratio of the real estate sector’s contribution to the growth is significant.
Al-Jarrah also noted that the global financial crisis affected the real estate market in Kuwait, where real estate transactions declined in 2008 by 33% compared with 2007.
Al-Jarrah also suggested a six-step solution to revitalize the real estate market and its marketing activities:
- changing real estate marketing strategies through the correction of real estate prices to better fit different social segments
- creating new financing tools to support all different groups and factions to own property
- training managers, marketing representatives, and staff working in the real estate marketing industry and following up on the latest ideas and theories in the domain
- inducing creativity and innovation instead of sticking to the so-called “traditional” real estate
- targeting new segments by introducing a law that allows foreigners to own property with restrictions and while protecting the Kuwaiti privacy on the issue, for example by allowing the ownership of 250m2 apartments, or even two apartments, which leads to keeping a large part of money inside Kuwait instead of sending it to families in home countries
- abolishing acts n. 8 and 9 that ended the citizens’ dream of owning their dream house, by denying mortgage, and thus preventing them from obtaining financing; these laws did not differentiate between developers and speculators and also prevented companies from owning private housing vouchers
For his part, Senior Marketing Analyst at ARA Research & Consultancy, Alexander Iskandar gave a speech under the title of “Overview on the market and the pricing crisis”, focusing on the current topic of the real estate pricing problem as a result of the global financial-economic crisis. Iskander approached the issue from the symbolic significance of the mortgage bubble explosion in the United States, passing through the Kuwaiti economy structure analysis and the position of real estate sector in it, all as an entrance to identify key factors affecting supply and demand in real estate, in all areas like private housing, residential apartments and commercial real estate.
In his analysis of the evolution of the real estate sector during the second oil boom, Iskander pointed out that this sector has declined to constitute 4% of the Kuwaiti GDP, and when compared to the performance of the financial sector in Kuwait, the real estate sector declined in the past five years from 43% to less than a quarter of the financial sector’s contribution to the GDP. Moreover, based on the value of trade in the local real estate market during the last decade, one can see the cycles in this sector, to finally note the severity of the drop in market transactions liquidity during the past year.
Iskandar said that if the acts 8 and 9 of 2008 denied the private sector from exchanging private housing real estate and from mortgage and financing, which led to an accelerated drop in prices, the research conducted by ARA Research & Consultancy on the other hand, has shown a drop in demand on investment and commercial real estate.
This in turn, led to a drastic decline in rental prices, for example, the pace of starting new companies dropped by 26% last year, when at the same time, vacant office space for rent makes 83% of those that were operational at this year, in addition to 51,000 m2 are expected to enter the market until the end of 2009, which decreased the rental prices to the level marked in 2005.
Iskander concluded that
“in light of studying the evolution of real estate in Kuwait, the time has come for real estate companies to adopt new strategies to develop future projects, and to lay the foundations for cooperation between both the private and public sectors.”
Thursday, June 25- 2009 @ 12:02 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.