Kuwait Construction and Real Estate Nearly 11% of GDP

    According to the Oxford Business Group, Real estate has long been a mainstay of Kuwait’s non-oil economy, along with construction. In 2014, the two industries together accounted for 10.6% of non-oil GDP. Kuwait’s real estate sector is particularly well poised to face lower prices, with residential the largest with sales reaching USD4.6bn in 2015. A combination of high demand and state support have kept the sector moving forward at a steady pace.

    Kuwait’s government works through several agencies like the Kuwait Investment Authority (KIA), the Kuwait Credit Bank (KCB) and the Public Authority for Housing Welfare (PAHW) to support the sector’s expansion. KIA typically focuses on projects abroad, but also invests in real estate projects at home. KCB offers credit to Kuwaiti nationals to support real estate, industrial and agricultural transactions. As for the PAHW, it provides both housing units and loans to married Kuwaiti nationals.  
    The relatively short supply of land in Kuwait drives the dynamics of the real estate markets with around 6-7% of total land area open for development.
    Kuwait City possesses just 63 m2 of urbanized land per capita, far lower than in other GCC metropolitan areas like Riyadh (171), Bahrain (194) or Dubai (468), according to data gathered by the Kuwait Real Estate Company (KREC) in November 2015. Demand for available plots far outstrips supply, with over 100,000 government housing applications pending and 44,038 vacant land parcels available in 2015, according to KREC.
    In recent years, the investment segment has gained ground, posting growing sales figures for investment apartments and other non-residential units, which reached USD4bn in 2015. Commercial sales, meanwhile, came in at just under USD1.5bn that year.
    Residential sales declined by some 28% year-on-year (y-o-y) in 2015, from a monthly average of USD523.6 million to USD375 million, according to data published by the National Bank of Kuwait NBK in March 2016. KCB approved 1210 loans worth USD71.4 million for additions and renovations in 2015, a 48% increase on 2014. 
    Since Kuwaitis tend to opt for home ownership, foreign workers account for the bulk of apartment tenants. Average monthly sales decreased from USD 499.4 million to USD338 million between 2014 and 2015. 
    In 2016 the government began to distribute housing units in newly completed residential cities, including South Al Mutlaa and South Saad Al Abdullah and authorities expect forthcoming projects to deliver 174,000 new housing units by 2020. 

     “…authorities expect forthcoming projects to deliver 174,000 new housing units by 2020.”

    The commercial market recorded an unusually strong start to the year in 2016, with 14 transactions worth USD297.7 million in February, a 17% y-o-y increase. Between Q3 2011 and Q2 2015, office occupancy ratios rose from 59.4% to 86.7%, according to a survey by KREC. 
    The construction industry in Kuwait is among the strongest in the region. Between 1995 and 2013, Kuwait’s population doubled from 1.8 million to 3.6 million, according to data from the UN Department of Economic and Social Affairs, with mid-year estimates for 2015 at around 4 million. Despite this rapid growth, just 6-7% of the country’s 18,000 km2 land area was open to development as of November 2015, according to the Kuwait Real Estate Association.
    The government is enhancing infrastructure across the board by constructing a metro system, expanding the international airport and upgrading several highways and roads. As of July 2015, Kuwait’s prospective developments were worth USD123.6bn, more than those of Qatar (USD113.8bn), Oman (USD29.6bn) and Bahrain (USD25bn), according to data gathered by the Middle East Economic Digest. The value of contracts awarded in 2015 totaled USD32 bn, an increase of 20% over 2014, according to NBK. 
    By the end of June 2016, Kuwait’s active and planned projects market reached USD254bn in value, according to NBK. The state awarded USD1.9bn worth of construction projects in the first half of 2016. Authorities expect upwards of USD 99.2bn worth of development projects over the next five years.
    A new law for public-private partnerships (PPPs) was fully implemented in 2015 prompting authorities to set their sights on incorporating private partners into projects worth USD36bn, Adel Mohammad Al Roumi, then-president of the Kuwait Authority for Partnership Projects (KAPP), told Reuters in October 2015.