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Kuwait Real Estate Report Q4 2011
Business Monitor International, Oct 2011, Pages: 42
Business Monitor International's Kuwait Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kuwait's Real Estate industry.
The outlook for Kuwait's real estate sector remains positive. The market is recovering, backed by increased government spending and robust economic growth. According to financial institution Kuwait Financial House, real estate deals increased 43% in Q211 while transaction values reached KWD1bn. This expansion builds on steady growth since mid-2009, led by the private residential sector. Commercial real estate, however, continues to suffer from a glut in supply in all three cities that BMI cover – Kuwait City, Salmiya and Al-Jahara – and across all sub-sectors.
The year 2011 is expected to be a turning point for the commercial market. After rental prices contracted again for several sub-sectors in H111, our sources expect that the market will stabilise in H211 before expanding 0-10% across the board in 2012. However, with additional GLA set to hit the market in 2011, prices are forecast to soften further if there is not a proportional increase in demand.
Supply and demand are forecast to expand in the short- to medium-term from 2012 onwards, generated by increased liquidity in the market and renewed investor confidence. A new law authorising Islamic banks to finance private property purchases by individuals, will also generate demand in the residential sector, as will the expected legislative reforms enabling foreigners and expatriates to become property owners. The KWD37bn Kuwait Development Plan is expected to stimulate growth in the residential sector, while the Kuwait Investment Authority will invest KWD1bn in the commercial and investment segments. Projects being developed include the construction of the business hub Silk City at an estimated cost of US$77bn. Large infrastructure projects in the pipeline, such as a new railway and metro system, will also be a springboard for further sector expansion.
Kuwait's robust economic outlook – driven by increasing hydrocarbons prices, rising oil export revenues and a strong diversification policy – underpins the sector. According to the IMF, Kuwait's economy is project to expand by 4.4% in 2011, and BMI forecast further growth to average at 4.0% through to 2015. BMI believe that Kuwait's economy will only slightly be affected by the political tensions that started in early 2011.
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