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Kuwait: Real estate prices make leaps, gov’t attempts to control

Real estate prices

Kuwait, (Business News Report) – Real estate prices in Kuwait have jumped significantly, while the Kuwaiti government is trying to find solutions and control the rise.

Investors in the real estate sector believe that the rise in real estate prices is preventing a revival in this field.

The sector’s circles confirm that residential real estate witnessed unprecedented rises during 2021, which requires all actors to identify the reasons for this and try to address its effects.

Real estate prices

Realtors say that certain areas have witnessed increases of more than 35 percent. This which led to a significant inflation in the value of residential real estate assets in light of the scarcity of land supply.

Former Director General of the Kuwait Real Estate Clearing Company, Tariq Al-Ateeqi, stated that real estate prices reached unexpected limits last year. He added that this calls for diagnosing the reason for these rises, which occurred within only one year.

Al-Ateeqi considered that one of the most important reasons for the rise was the entry of a segment of investors and speculators into the residential areas with greater force than before.

“Some speculators bought lands last July and sold them last November, achieving returns that exceeded 10 percent,” he said.

He explained that existing residential real estate with an area of ​​375 square meters in the areas such as Yarmouk and Khalidiya was purchased last May at a value of 500,000 dinars ($1.6 million) and resold in October 2021 for nearly two million dollars.

Al-Ateeqi explained this by noting that the prices f these real estate witnessed an increase of $66,000 every month for five months. “This is clear evidence of the entry of investors and speculators into the residential real estate market,” he said.

Government support

Government subsidies for water and electricity in private housing areas, which are mainly directed to citizens’ housing, indirectly stimulated investors to buy these properties. They benefited from this advantage, unlike the investment and commercial sector, which does not have this advantage.

The other reason that encourages speculators and investors to direct their money to the residential sector is their exploitation of most of the homes that are bought as apartments for rent, even though they are located in residential areas where the main objective of establishing them was not an investment.

However, due to the high returns that investors obtain, and the cheapness of their prices compared to investment buildings, it made them turn to them, not caring about what the prices will reach.

The failure to apply the tax law to those who own more than one property, with some investors owning dozens of lands without offering them in the market or developing them, led to an increase in residential real estate prices.

The head of the Kuwaiti Federation of Real Estate Brokers, Abdulaziz Al-Dughaishem, says that the private housing sector recorded in the first half of 2021 increases of more than $5,000 per square meter in some areas, especially those located in the governorates of the capital and Hawalli, with the rise in prices of small spaces of private housing,

“The matter is still the same with this momentum,” he said.

This pace of increases also included the Sabah Al-Ahmad marine area, where the prices of coupons increased by more than 30 percent, and which witnessed a great demand for them, especially in the fourth and fifth phases during the second half of 2021.

Al-Dughaishem expects private housing prices to remain stable in 2022 unless major changes occur that affect the market, the most important of which is the introduction of new housing cities on the market and the activation of mortgages again.

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