Real estate sales activity in Kuwait declined in January, falling to its lowest level since September 2005, as residential sector saw decrease in transaction numbers, according to a report.
A total of 294 transactions were registered in January, at a value of KD79.8 million (Dh989m). January sales volumes plunged 29 per cent, while the number of transactions fell by 36 per cent month-on-month. Both were down from a year ago, by 59 per cent and 53 per cent, respectively, National Bank of Kuwait said in a monthly report.
According to the bank, the decline in January came largely from decreased activity in the residential sector where sales fell 51 per cent compared to December. Meanwhile, sales of apartments and commercial property rose seven per cent while number of transactions was down nine per cent. But, average transaction value in this sector rose by 18 per cent, though it was down nine per cent in the residential sector. The number of transactions in the residential sector represented the bulk of real estate sales during January with 61 per cent of total number of the transactions. Mubarak Al Kabeer and Farwaniya governorates accounted for more than half of those residential transactions, while Hawalli and Ahmadi governorates dominated the apartments and commercial properties.
However, there was a jump in loans approved by the Savings and Credit Bank (SCB) during January, as the number of approved loans rose by 47 per cent while their value increased by 68 per cent compared to the previous month. SCB approved 507 loans in January, compared to a monthly average of 412 in 2008 and 378 in 2007. The value of loans approved was KD23.5m, 57 per cent and 88 per cent above the average for 2008 and 2007, respectively. Growth received a large push from rapid increases in loans for new construction and for the purchase of existing homes which rose by 80 per cent and 46 per cent, respectively, as the value of loans disbursed jumped 31 per cent to KD12.9m.
Global Investment House (GIH) said in a report earlier that residential real estate segment witnessed a slowdown in activity in 2008 as compared to the speculative growth in 2007. According to market players, prices declined up to 60 per cent in some residential areas, while the expected recessionary pressures coupled with liquidity issues could shed its negative effects on both commercial/office front with vacancy rates touching 30 per cent to 40 per cent.
On the commercial and office front, the GIH report said economic slowdown and recessionary pressures seen for the next period in addition to liquidity issues will shed its negative effects on the office space as well. According to industry sources, it is seen that many companies will be cutting costs through layoffs thus giving up two-three floor rentals. This will lead to higher vacancy rates in some office buildings.
On the other hand new supply is about to enter the office space thus leading to higher vacancy rates. According to market sources, in such economic downturn estimated vacancy rates might reach 30 per cent to 40 per cent. As a result both rentals and prices for office space are estimated to fall around 20 per cent for 2009-10.