By Ben Garcia
KUWAIT: The real estate market was adversely affected by the coronavirus pandemic, especially commercial properties. But according to the Kuwait Real Estate Association, the downturn is temporary and a return to growth is on the horizon. Prior to the pandemic, according to data published by the association, residential properties numbered 371,006 and investment properties 13,353. Based on 2017 data, only 21,529 apartments were vacant, so the occupancy rate was 86.8 percent.
The average monthly rent at that time was KD 279 and after adjusting the occupancy ratio, the effective monthly rental was KD 242. At that time, the association expected the construction of an additional 875 buildings or an additional 6.6 percent of apartments during the next two years (until 2020).
But even prior to the pandemic, there were lingering doubts about the property market, and a slowdown in occupancy rate was seen due to the sharp drop in oil prices on the international market. "The average monthly rental decreased to KD 278.9 in Q4 2017 from KD 313.2 in Q2 2015. This is a decline of 10.9 percent over two years, an annual decline rate of 5.5 in monthly rentals," the association revealed.
Huge impact
Speaking to Kuwait Times, Ahmed Fares Al-Dowhees, Secretary General of the Kuwait Real Estate Association, acknowledged the huge impact of the coronavirus pandemic on Kuwait's investment real estate sector, both commercial and residential.
"During the first salvo of the pandemic, many were gravely affected, including the real estate sector. The same situation goes for other countries as well. Until now, some of the businesses are yet to recover, but this is the reality in a crisis situation such as the pandemic. Many businesses have closed. Restaurants, coffee shops, salons and health clubs were all affected, big and small shops were closed including entertainment facilities for children, which are yet to reopen. Tenants said they barely get anything from the businesses they are in, so some had to close their companies," Dowhees said.
"But thank God the government recommended several measures to cope with the impact of this pandemic, including waiving rent and the suspension of repaying loans to banks. Those recommendations floated by MPs at that time helped us a lot to quickly overcome the immediate impact of the pandemic. Real estate owners have given many of their tenants discounts, while some even waived two or three months of rent to help renters cope," he added.
Dowhees believes the slowdown is temporary and will come to an end at the beginning of summer. "Vaccines have already rolled out in many countries around the world and the majority of the population will be vaccinated by that time. Besides, we have been through many trials - this scenario is very familiar to many of us in Kuwait. We have overcome several challenges, from the Al-Manakh stock market crash to the invasion of Kuwait (by the Iraqis) and the Gulf War, but we were able to rise up from these crises," Dowhees said.
"I believe this crisis is temporary too and will come to an end very soon. We will return to normal in a matter of months, inshallah, and we will be as strong as before - mark my words. Many commercial establishments were unable to cope and closed their shops temporarily; many were out of jobs. But if you notice now, we are almost back to normal," he added.
Asked if there is an oversupply of apartments in Kuwait currently, Dowhees said the market is rebalancing. "There is supply and there are tenants too. People are moving from one flat to another because some flats have now reduced their rent by up to 20 percent. This is normal. People will move from one place to another, whether we like it or not. That is why in order to avoid losing their tenants, building owners should lower the rent as well," he said.
Expats' numbers
According to Dowhees, the Kuwait Real Estate Association is against government efforts to reduce the number of expatriates in the country. "Such moves will drastically affect the real estate situation in the country. We need expats to work for us and help us recover from the onslaught of the pandemic. Besides, we have several plans for Kuwait's 2035 vision. We need housing projects. We need to build new cities. We have the Silk City project, for example. Who will help us build these projects? Who will help us run related businesses? In fact we need more of them [expatriate labor]," asserted Dowhees.
"UAE and Qatar continuously host expats to help their economies. We are not unique from these countries. They rely on expats and I believe Kuwait is a great and generous country for expats too," he added. "But on a personal note, I agree with the government's decision to let go of expats over 60, but only if they have no families here. If they have families, they need to reconsider this decision. What we want them to look into is the fact that 20 expats have to live in one apartment - this is dangerous and unhealthy."
In mid-2020, Ibrahim Al-Muhaini of Al-Muhaini Real Estate Center admitted that real estate rentals were gravely impacted by the departure of expatriates. Nearly a quarter million expats have left the country after losing their jobs due to the pandemic, and according to estimates, this figure could rise to almost one million, Al-Rai Arabic daily reported. "I don't think that many expats have left. A few thousands for sure, but not more than 100,000; maybe 67,000 only," Muhaini said.
The Kuwait Real Estate Association was established in 1990 to act as an umbrella organization for the real estate owners to represent their common interests in the business community and oversee the rights of the real estate sector in the country. It was founded by late Sheikh Nasser Saud Al-Sabah, who exerted a lot of efforts to create the group.