According to an economic expert, rents in Kuwait are falling, and the decline will continue until early 2018. Dr Hajjaj Bu Khudoor, also a former Kuwait University professor, told Kuwait Times there are three major factors why residential and investment rentals are down.
“Of course, it is still related to the global financial crisis of 2008, and now after eight years, Kuwait is getting rid of bad assets,” he said. Another major factor according to Bu Khudoor is the decline in demand for apartment rentals after the government has provided more homes for locals. “Also, the reality in the market is obvious – we have greater supply and reduced demand,” he said.
The downward trend represents a dramatic shift in rental prices which have rose steadily in recent years. Last year saw a 2 percent decline in occupancy of rental apartments from June to December and the real estate market as a whole has remained soft so far throughout 2016. Record show that in 2015, the Public Authority for Housing Welfare for Kuwaitis reported that over 8000 locals applied for housing units and per record in 2016, the number has decreased to 4500. Earlier reports indicate that Kuwait’s housing shortfall was expected to narrow substantially with 25 projects scheduled to be delivered to the Public Authority for Housing Welfare (PAHW) in 2015, and three more projects coming online in 2016 with several thousands of homes to be added to the market.
The rentor’s life
Apartment living, however, has become a norm for a large segment of citizens as well as most expats. “The crackdowns in recent years have nothing to do with the current rental decline; because as some expats are deported, more newcomers are welcomed – so this is not an issue at all. Maybe a few families have left because of the so-called high cost of living in Kuwait, but they are few,” Bu Khudoor pointed out. He said rents will continue to fall by up to 40 percent, and the real estate sector will stabilize only by mid-2018.
Some families in apartment-dominated areas have already taken advantage of lower rent values. Biju, an Indian expat, shifted with his family to a new building in Farwaniya after he learned that the rent of his old apartment was far higher than a new apartment opposite his building. “The rent here was KD 40 cheaper, and after discussing it with my wife, we shifted the following month,” he said.
A Sri Lankan renter in Hawally has a similar story to tell. “I learned about a cheaper flat in another block, so I decided to shift all the tenants of my apartment there,” he told Kuwait Times. Six people share his two-room flat, while he has converted the living room for his own use. He used to rent his previous apartment for KD 340, but only pays KD 300 for the new one.
Speaking with the Kuwait Times, a local realtor, named Abu Hussein complained of unprecedented drop of flat rentals in Kuwait. He said the drop of flat rentals could be attributed to little bit of almost everything from expat crackdown to the slump of oil prices, regional instability and wars in neighboring countries.
“I think the drop is related to almost everything. I also see the crackdown has affected the market tremendously because many expats has been deported and few managed to come back. I also see the expats were disappointed on the sudden increase of services, we also noticed that many in the government doesn’t really want or welcome expats at all, so it contributed to the growing dissatisfaction of expats in staying in the country. So the result is over supply of buildings and fewer people to occupy the flats,” he said.
By Ben Garcia