ShareBy Majd Othman
KUWAIT: Kuwait Economic Society (KES) hosted a seminar titled 'Real Estate Inflation and Ways to Confront It' on Monday. Chairman of the Board of Directors of the Real Estate Union Ibrahim Al-Awadhi, Vice President of the Real Estate Brokers Society Emad Haidar and member of the Economic Society Sultan Al-Jazzaf participated in the seminar.
Awadhi said in his opening remarks that the government is unable to keep pace with the number of housing requests, which are increasing day by day. The number of marriages annually reaches 7,000, while housing distributions (excluding the latest distribution in Mutlaa) are only around 2,000 plots, creating a gap between supply and demand, he pointed out.
He added many residential areas have turned to building systems with the knowledge of the government, alluding to the clear reverse migration from the investment real estate sector to residential real estate during the COVID pandemic.
Awadhi indicated the occupancy rate of the residential sector exceeds occupancy in the investment sector considerably, explaining that before COVID, occupancy in the investment sector was around 92 percent. "It has fallen today to 81 percent, with vacancies amounting to around 73,000 apartments, making real estate dealers realize that investing in the investment sector is highly risky. So they shifted to the residential sector," he said.
Awadhi said countries all over the world have witnessed an increase in real estate prices, but the rise in the Kuwaiti market cannot be compared to other countries, pointing out that the market is always linked to supply and demand. He said that the Real Estate Union noticed the existing applications at the Public Authority for Housing Welfare exceeded 90,000, while available land, if the new distributions are excluded, does not exceed 12,000 plots.
Awadhi explained the investment real estate sector faced a problem due to the government's policy and its preference to keep the number of expatriates at certain levels and deport some of them to their home countries. "Currently, single expatriates make up 40 to 50 percent of the residents of a single building, while many residents have started moving to acceptable residential areas in terms of price such as Salwa, Rumaithiya, Andalus and Omariya," he said, noting that investment real estate prices are still stable despite the decline in demand, while returns have become less than 7 percent.
Meanwhile, Awadhi stressed that the key to resolving the housing crisis is by freeing up land. Other solutions are complementary, such as allowing real estate developers to invest, approving the credit and mortgage bank law, engaging the private sector and encouraging citizens to accept apartments, he said, stating that the industrial real estate sector witnessed abnormal price increases, while returns ranged between 8 and 8.5 percent.
COVID crisis
As for commercial real estate, Awadhi confirmed it still maintained its strength despite the COVID crisis and the closure of many businesses. "I think this is linked to a fundamental matter, which is the nature of the economic environment in Kuwait, as a merchant has two options - the stock exchange or real estate. So, we noticed the volume of liquidity and transactions are very large in the real estate sector," he said.
Haidar said the rise in residential real estate prices is due to the increase in the construction rate from 150 to 210 percent and speculators and investors who switched from investment to residential real estate, in addition to the sector receiving subsidies for electricity and water, not to mention the rise in wages, labor and delivery of land. He stressed the need to organize real estate markets, buying and selling, the rental market, exhibitions, foreign real estate and the digital market, as all these markets need to re-review their laws and organize their professions, integrating some of them and separating others.
"We have a promising digital market in front of us that needs regulation, and the beginning should be from regulating advertisements by the ministry of commerce and concerned authorities, so any announcement is only done with a license, followed by the process of organizing financing between banks and real estate offices," Haidar said.
He said all over the world, countries have a unified electronic lease contract except for Kuwait, indicating that one of its benefits is to link the interior ministry, Public Authority of Civil Information, real estate offices, ministry of justice and the ministry of electricity. "If a tenant leaves without paying the rent, then access can be very easy instead of waiting for two years," he added. Haidar noted that the electronic sales contract or the electronic platform will start operating early next year and the paper contract will be permanently dispensed with by the end of June 2023, stressing that it must include the lease contract.
