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Dwindling expatriate families lead to more empty apartments
May 5, 2018, 3:59 pm

Government policies and economic belt-tightening among many companies have combined to increase the number of expatriate families leaving the country from a slow trickle earlier, to a steady flow now. Many people who were waiting for schools to close, are now packing-off families back to their home countries, and vacating their apartments to move to shared bachelor accommodations.

According to the Kuwait Real-Estate Union, there are currently 49,130 empty apartment flats in Kuwait and 26,466 new ones are under construction. More than 75,000 units need to be ‘absorbed’ by the domestic property market in the next 4-5 years, says the Secretary-General of Kuwait Real-Estate Union, Ahmad Al-Dewaihees.

Speaking at a recent news conference, Al-Dewaihees disclosed that the rate of occupation of property units in Kuwait amounted to 86.8 percent in the current year. This represents a drop of 8.2 percent as compared to the past five years when occupancy had soared to around 95 percent, said the Secretary-General.

In the meantime, average monthly rent also dropped from KD279 to KD 242, a drop of 13.2 percent, said Al-Dewaihees, citing a report prepared by the Union. On the demand side, the proportion of the expatriates' populace growth, which reached 4.8 percent over the past five years, dropped by two percent in 2017 and is expected to fall by a further 1.5 percent in the coming five years, said Al-Dewaihees.

The report prepared by the Kuwait Real-Estate Union included a survey covering a sample of 162,576 apartment flats in 5,695 plots, at 19 locations. It studied 875 plots, including 26,466 under-construction residential units in all districts, in addition to 13,535 built ones, where proportion of new units amounted to 6.6 percent of the promoted plots.

Regarding transactions involving ownership flats, the Secretary-General revealed that such transactions, which exceeded 1,000 in 2007 and 2008, fell sharply following the global economic crisis that erupted in 2008, dropping to its lowest in 2012. A mild recovery that began in 2013 saw the number of transactions reach 973 by 2015, but then it again fell to register just 671 transactions in 2017, said the Secretary-General.

In its monthly brief on economic activity in the country, the National Bank of Kuwait (NBK), the premier commercial lender in the country, reported that though real estate activity was up in February, the prices appeared to soften. Sales during the month stood at KD189 million, up by 22percent year-on-year (y/y) mainly from the strength of sales in the residential (26% y/y) and investment (46% y/y) sectors, while commercial sales remained weak.

The report showed that though residential land and home prices were within their 12-month ranges, prices in all sectors were generally softer in February. The exception was the index of investment prices, which slipped to its lowest level in more than four years.

Reiterating the view expressed by the secretary-general of Kuwait Real-Estate Union, the NBK report concluded that the fall in investment prices may reflect oversupply in the investment market (rental units) and lower demand stemming mainly from reduced growth among expatriates.

With more apartments coming to the market in the next five five years and expatriates, who account for the bulk of rented apartments, leaving the country, stakeholders in Kuwait’s real-estate, including owners, investors and brokers face a challenging period ahead.

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