Kuwait: May logs highest real estate sales so far in 2017 amid stabilising prices
The real estate market picked up momentum in May.
Sales rose to KWD 289 million, their highest level in 18 months and up 37 per cent year-on-year (y/y). The residential and investment sectors provided significant support to the real estate market, with sales increasing by 23 per cent and 38 per cent y/y, respectively. Activity has been relatively volatile in recent months, with three of the last six months seeing elevated sales, something that could be signalling an end to the two year slowdown. Real estate prices across most sectors continued to hold steady, currently off nine to 10 per cent y/y.
The residential sector bounced back following a soft April. Sales jumped to KWD 138 million during the month, on 406 transactions. KWD sales improved by 23 per cent y/y, supported by a 46 per cent rise in the number of transactions from a year ago. A surge in home purchases was witnessed during the last two months; 233 and 203 homes were sold in April and May respectively, the highest since March 2015.
Residential real estate prices were flat in May, continuing to show a stabilising trend. The NBK residential home price index stood at 151.2 point, flat for the month. The index has been stable and in the vicinity of 151-152 points for almost three consecutive quarters, though it remains down nine per cent y/y. The NBK residential land price index retreated in May to 169.1 points and is down 9.5 per cent y/y.
Investment sector activity was strong this month, compensating for April’s weakness. Sales came in at KWD 87.7 million, up 38 per cent y/y. The number of transactions improved as well, advancing by 10 per cent from the previous year.
Investment building prices logged a slight gain for the month. The NBK investment building price index stood at 185.1 points, up 1.7 per cent for the month, a five months high. The index is down 10 per cent y/y, an improvement from a few months back as it appears also to have bottomed out in tandem with prices in the residential sector.
Commercial sector activity picked up this May, following four months of low volume activity. Sector sales reached KWD 62.8 million on six transactions; the largest three transactions were a plot in Egaila for KWD 28.5 million and two buildings in Sharq for KWD 20.4 million and KWD 16.8 million.
The slowdown in the real estate market, and the price correction that accompanied it, has started to have an impact on housing rent and consumer inflation. The weak market and a rise in vacant apartments since the end of 2015 have exercised downward pressure on rents though the impact on inflation had been elusive, until recently. Easing rent inflation only became visible in the housing services component of the CPI in March 2017. Housing inflation, mostly comprised of housing rents, slowed from 6.4 per cent y/y in 4Q16 to a three-year low of 4.3 per cent y/y in 1Q17.