Total residential sales reached KD 1,233 million in 2015 year-to-date (ytd) and KD 95.1 million in November. KD volumes and number of units sold ytd were both down 28 percent and 33 percent, respectively, compared to the same period last year. Plots made up 45 percent of residential transactions in November, well below the 64 percent average recorded in 2014, likely reflecting a decline in speculative activity in the residential land sector as well as a decline in the distribution of vacant plots in Sabah Al-Ahmed City, which accounted for 50 percent of all residential transactions in 2014.
Sales in the investment sector (mostly apartment buildings) rebounded in November to KD 121 million, almost doubling month-on-month and rising for the first time in four months. Ytd, total KD volumes reached KD 1,148 million, a 32 percent decline from the same period last year. In terms of transactions, 1,312 sale contracts were executed ytd, 18 percent lower than last year.
The commercial sector remains active with sector transactions up year-to-date. KD volumes totalled KD 412 million ytd, a slowdown of 21 percent from the same period last year, while ytd transactions in November dropped 1 percent from the same period last year. In November, the sector recorded six transactions worth KD 81.2 million. The largest transaction was recorded for a 7,600 sqm shopping mall in Salmiya for KD 70 million and which resulted in the best sales volume since November of 2014.
Private construction activity has been slowing since mid-2014 as evident by the number of construction permits issued this year, in sync with slower real estate. According to Kuwait Municipality's annual report, the total number of permits issued for new construction, across all three sectors, declined by 31 percent year-on-year (y/y) during the fiscal year 2014/15 (FY14/15) compared to a record growth of 61 percent y/y in 2013/14. The residential sector was granted 3,314 permits for new construction in FY14/15 down from 4,597 permits the previous year, a 28 percent decline. Similarly, permits for new construction in the investment sector declined by 27 percent y/y. As a result, prices of basic construction materials in Kuwait have been easing. Not surprisingly, inflation in iron and steel appears to be correlated with the amounts of subsidized iron bought for construction purposes.
The pressure of external macroeconomic factors may have incentivized speculators to exit the real estate market. Real estate price indices remained under pressure in November, struggling to maintain positive year-on-year growth. The residential-land index was the only one to generate positive growth this month, registering a 2.6 percent increase y/y. The investment building price index and the residential-home price index remained in negative territory.
The residential home index continued to trend downward. In November, the NBK residential-home index stood at 173.0 points, 7 percent lower y/y. The last time the index logged a similar y/y decline was back in August 2009.
The residential land index is the only one to remain in positive territory. The index, at 201.1 points, is up 2.6 percent for the year. Out of the 16 areas included in the index, only three areas exhibited a price increase this month whereas four out of the 16 areas included in the index were inactive.
The investment building index was down 1.4 percent for the year. Recording its first negative y/y loss since July 2012, the sector has managed to maintain positive price growth throughout the year. Three out of the eleven areas included in the index were inactive, and only one registered an increase for the month.