According to a report by the National Bank of Kuwait, the real estate sector in Kuwait may witness a slight rebound in 2024. The report suggests that this rebound could be driven by a lower base effect from 2023 and potential interest rate cuts later in the year, which could stimulate demand for credit.
However, there are several factors that could negatively impact real estate activity, including the increase in real estate valuations, particularly in the residential segment, as well as delays in the redevelopment of inner-city areas such as Jleeb Al-Shuyoukh. The report also highlights geopolitical risks in the region and uncertainty surrounding the global macroeconomy as potential deterrents to real estate activity.
The report emphasizes the positive impact of recent legislative measures on the real estate sector. The adoption of the Residential Cities Law and the “Anti-Monopoly of Vacant Lands” Law are expected to support the private sector’s role in addressing the housing crisis and accelerating the development of unused lands. Additionally, the approval of the Mortgage Law (Finance Law) by the National Assembly could boost demand in the medium term. The report indicates that the real estate sector ended 2023 on a more positive note, with major deals in the commercial sector and stable sales in the residential segment contributing to overall sales in the fourth quarter.
The real estate price index issued by the National Bank of Kuwait witnessed growth in the fourth quarter, driven by an increase in investment real estate prices, offsetting the decline in residential sector prices. However, the real estate market activity in 2023 was generally weak due to rising interest rates, increasing residential real estate valuations, and the attractiveness of alternative investment assets. Residential unit sales in the fourth quarter of 2023 saw a marginal decline, but demand increased after a summer lull, resulting in higher real estate transactions.
On an annual basis, residential sales fell by a further 27%. The decline in residential sales in 2023 can be attributed to weak sentiment, rising property valuations, increasing interest rates, and delayed project plans for inner-city redevelopment. Investment sector sales recorded positive growth for the second consecutive quarter, indicating a revival in demand for investment real estate, despite the rise in interest rates. Commercial sales also supported total sales in the fourth quarter, with notable transactions recorded in Kuwait City and Al-Ahmadi Governorate.
The report highlights the fluctuation in real estate prices, with housing unit prices decreasing and residential real estate valuations experiencing a decline in most governorates. However, investment sector prices rose, particularly in Kuwait City and Al-Ahmadi Governorate. The overall real estate price index for 2023 witnessed slower growth compared to the previous year, reflecting limited growth in residential sector valuations.