Gulf Bank hosted a closed session to discuss the future of Kuwait's real estate market. Experts noted that while the overall market is healthy compared to other Middle Eastern countries, some submarkets show weakness. Investment properties saw value declines from 2018-2019 due to decreased trade volumes. Residential and commercial properties performed better with rising deal values and volumes. However, retail properties face weak demand due to high rents set by owners. The discussion also centered around Kuwait's lack of mega development projects compared to other countries and the need for increased land releases and efforts by the Housing Welfare Authority to support larger projects. Transparency around property data and increased collaboration between the private sector and government were also cited as important issues.

1. GULF BANK HOSTS CONVERSATION
ABOUT THE FUTURE OF REAL ESTATE
IN KUWAIT
Dr. Ehsan Bayat

2. GULF BANK HOSTS CONVERSATION ABOUT
THE FUTURE OF REAL ESTATE IN KUWAIT
• In early December, Gulf Bank hosted a closed session on the real estate
market in Kuwait. The meeting included experts, decision makers, and
leaders from the government, nonprofit organizations, and real estate
companies. The discussion was part of the bank’s commitment to
creating a platform for the exchange of ideas to improve the nation’s
business environment. Many experts consider the Kuwait real estate
sector to be in good health compared to other Middle Eastern countries,
thanks to a halt in expansion between 2013 and 2016 that has kept
property supplies under control.

3. BREAKING DOWN THE PERFORMANCE
OF THE KUWAIT REAL ESTATE SECTOR
• However, some submarkets show reasons for concern. In every quarter of 2018,
investment properties saw a decline between 0.3 and 0.5 percent, despite increased
interest from foreign investors. This trend continued into 2019 with a decline of 0.3
percent in the first quarter compared to the prior year. These declines in value have
impacted trade volumes, with declines greater than 16 percent in the first quarter of
2019. While trade volumes grew slightly in the second quarter, they declined sharply in
the third, with a year-on-year decrease of 25.7 percent.
• Residential and commercial properties performed better than the investment sector.
The volume of residential and commercial real estate deals increased in 2019, as did
the value of properties in each of these submarkets. However, retail and restaurant
properties are suffering due to weak demand, perhaps due to high rent set by owners.
• The overall value of land in certain parts of the country has increased dramatically in
recent years. In 2015 and 2016, the average price per square meter for investment
properties in the capital were about KD 800, but this has risen to about KD 1,500.
During the same time period, residential land in Mubarak Al-Kabeer Governorate rose
from KD 400 to KD 600.

4. ADDRESSING THE LACK OF MEGA
DEVELOPMENT PROJECTS IN KUWAIT
• Kuwait has few mega development projects compared to other countries in the region.
Some of the country’s primary projects include the Shuwaikh industrial and chalet
areas, and the development of the nation’s waterfront. The country is also investing in
new industrial cities and building gated communities. At the stakeholders’ meeting,
some discussion was directed toward Kuwait’s failure to keep pace with mega
development projects and the opportunities that exist in this sector.
• One issue that needs to be addressed before larger development projects can be
undertaken is the release of new land. The government is the main landowner in
Kuwait and will need to introduce new residential, commercial, and investor areas to
free up more property for development. In addition, there has a been a call for the
Public Authority for Housing Welfare to increase its efforts in supporting mega
projects, as it already has in the development of housing, offices, and malls in existing
cities and new residential areas like South Saad Al-Abdullah.

5. OTHER MAJOR HURDLES:
TRANSPARENCY AND COLLABORATION
• Transparency is another issue. The sector struggles to get relevant information about properties,
since transactions depend on data collected by multiple agencies. The decentralization of
information makes it nearly impossible to spearhead in-depth studies on the opportunities and
determine the outlook for the sector. Real estate companies in Kuwait have no central resource for
collecting sector-specific data, so providing information to potential investors, including feasibility or
development plans, proves extremely difficult. Greater transparency also would help reduce default
rates by increasing the information available to plan for future development. Moving forward, an
independent body also could be empowered to regulate supply and demand and set standards for
developers.
• Conversations at the recent meeting also turned to the role the private sector could play in
addressing real estate issues in the country. For example, Kuwait is currently experiencing a housing
crisis that has caused the government to subsidize rents at a rate of more than KD 2 billion during
the past five years. Developers have played little role in finding solutions to this crisis despite past
successes in projects in other parts of the Middle East. The government could more fully incorporate
private sector developers into its larger development plans to address collaboratively the problems
facing the industry. Developers may have important lessons to share with government agencies
about what has and has not worked in areas outside of Kuwait, while public officials have greater
insight into the current issue that could help inform how private companies approach development
goals.