Real Estate

Real Estate Recession in Kuwait

ryuker / April 3, 2018

Real estate in Kuwait has been crashing since summer 2017, and it will continue to get worst in the upcoming months. This time the recession will be worse than all the previous years and I will list all the reasons below.

1- Increase of interest rates : Most real estate investors in Kuwait invested 30% from their pockets and the rest is a loan from the bank. Interest rates were very low for a very long time, so they got used to pay small installments. Now interest rates are increasing, and the installments average per year is increasing.

2-Vacancy : Vacancy has been increasing more than ever, and most renters in the market are expats. Expats are leaving Kuwait due to the increase of cost of living leading to more vacancy. The increase in vacancy is creating an issue for landlords who borrowed money to build their properties, because their expenses is increasing (interest rate increase), and their income is decreasing (increase in vacancy).

3- Cost of Living : Cost of living is increasing in Kuwait forcing expats to leave the country. During the last 2 years, the government increase the cost of gas, electricity, water, and medical fees. There is also the tax on wire transfers for expats, which goes up to 5% per transaction.

4- The Overall Economy : The economy has been going down and the purchase power has been decreasing. The income of restaurants, retail, and businesses is declining all the way. You see retail have constant Sale to get rid of the supplies they have. You also see stores and businesses shutting down and laying off employees.

The problem with the Kuwaiti real estate market is that it is filled with junky properties. There are very few nice properties in the market, and very few properties are well maintained. Real Estate agents are more desperate than ever to sell any real estate. They really don’t like it when someone tell them that the market is crashing, and they always say that the real estate market will appreciate.

The real estate market in Kuwait is crashing and it will continue to do so. It is a buyers and renters market, they are the ones who will negotiate from a position of strength. For those who are renting, you can negotiate your rent, because vacancy is increasing on daily basis.

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