Kuwait real estate crisis made worse by expats leaving country as ordered
People are leaving Kuwait, flats are being emptied of their occupants, and that’s the tip of the iceberg for the country’s struggling properties market.
Why is Kuwait’s real estate market, worth 7% by market capitalization after Banks (51%), industrial (12%) and telecom (11%), heading towards a slump?
Secretary of Kuwait Real Estate Association Qais Al-Ghanem confirmed that the Kuwaiti real estate market is suffering as foreigners leave, reports Al-Rai daily.
He said expats will in June this year increase the rate of departure looking for greener pastures or returning home.
“The recent pressures imposed on expatriates resulted in a large number of vacant flats especially in the investment residential sector,” Ghanem said.
“The Kuwaitization policy, which is aimed at terminating the contracts of expatriates in the public sector and increasing the charges of services offered to them, and the announcement about a new tax system have contributed to the crisis,” reported the daily.
There are more that 2.2 million foreigners living in Kuwait.
He added he is expecting the rents to drop after the decisions concerning expatriates are announced, worsening the state of the real estate sector.
According to Gulf Business, Kuwait’s finance ministry is instructing ministries and government entities to prepare lists of foreign employees to be cut from April 2018 to limit public sector roles to Kuwaitis, quoting Arabic language newspaper Al-Anbaa.
“The government has committed to reducing the number of expat employees in a number of job categories each year to reach a 100% Kuwaiti workforce by 2022
Kuwaiti banks have been informed that Kuwaiti citizens are to take up most of the posts offered at the financial institutions, especially at leadership positions, Kuwait Times sources said.
Further expat squeeze
Kuwaiti MP Safa Al Hashem whos is not in favour of foreign expats staying beyond 10 years in the country has proposed a $3,300 fee for expat driving licences
As if not enough, the MP request implies as well an annual renewal fee of $1,657 for each car owned by expats.
Mixed economic reports
Recently, the Kuwait cabinet approved the official FY18/19 budget with expenditure growth of just 0.5%.
A National Bank of Kuwait (NBK) report projects a deficit of 16% of GDP (after the transfer to the Future Generation Fund) based on a $50 price for Kuwaiti crude.
Meanwhile, S&P affirmed Kuwait’s long-term sovereign rating at AA with a stable outlook.
“Project awards reached $1.5bn in January 2018, surpassing 2017’s monthly average of $1.1bn. with awards mostly in the transport, oil, and construction sectors,” said NBK.
BMI Research said Kuwait’s tenuous fiscal position and growing political instability cause headwinds for commercial property investment.
“A modest recovery in property prices and rents over 2018 is unlikely amid further oil production cuts,” BMI said recently.
Arab Times published a report saying spending on housing and construction is forecast to trigger hike in the realty demand in Q1 2018.
“It is also predicted that hotels and furnished apartments will flourish, in tandem with execution of government mega projects, namely development of Kuwait International Airport, expanding the Amiri Hospital, constructing Jaber causeway, Al- Jahraa and Jamal Abdulnasser roads, in addition to a number of private projects,” said the daily.
But the local property market has been feeling the strain.
The daily names imbalance in supply and demand, strict credit policies by banks, capitals shifting to stock markets, unsteady oil prices, geopolitical events and increase of construction materials’ prices, as contributing factors.
“Moreover, the sector recent recession was attributed to increase of power, water and fuel rates,” it added.
Young Kuwaiti citizens, who make up 60% of the 1.4 million Kuwaiti population, are the top trade seekers in stock exchanges.
Realty experts, interviewed by Kuwait’s National Agency KUNA, believe that some of the main factors affecting the market are shortage of promoted plots against high demand and rare investment alternatives.
“Rents in the investment and commercial sectors have recently dropped by 10-15%,’ they say.
Al-Ghanim affirmed that the market has remained largely in a lackluster status, with trades not exceeding 7% of the displayed properties.
“Up to 700,000 young Kuwaitis aspire to own a private house, but most of them cannot afford it. Figures by the Public Authority for Housing Welfare (PAHW) show that there are 100,000 residence applications per year,” said the daily.
“Abulaziz Al-Dghaisheem, chairman of a realty group, believes that auctions have stimulated the market, however geopolitical factors’ negative impact are still noticeable.
Director General of Athra Real Estate Company Maitham Al- Shakhs forecasts revival of the property market this year, amid predicted economic growth.”