KUWAIT, Oct 26 (KUNA) -- September was another "soft month" for the Kuwaiti real estate sector, probably linked to seasonal factors , with September being the last month likely to be affected by either summer vacations or the traditionally slow Ramadan period, according to the latest real-estate brief released by the National Bank of Kuwait.
There were 347 property transactions (residential, commercial and investment) registered at the Ministry of Justice, down 24 percent from August and well down on the 700+ per month levels seen in the buoyant pre-summer period. It was also the lowest level of sales for a year.
The next few months should be a better indicator of the underlying state of the market. "We expect to see some bounce back in the level of activity, with a combination of improving economic optimism, strong land sales and property's favorable position as an asset class," it said. All of these should help stimulate buyer interest.
Support for this notion comes from the more detailed weekly data, which show that activity accelerated in the latter part of the month: more than one-third of all September sales came in the final four days of the month.
In KD value terms, sales had a somewhat better month, reaching KD 173 million, up 55 percent from August and a huge 199 percent on a year ago. These numbers overstate the strength of the market, however.
Not only were sales extremely weak both in August and a year ago (thereby flattering any comparisons), but September's sales values were boosted by one very large sale in the commercial property segment, where values tend to be comparatively high. Commercial real estate had its best month in three years. Without it, overall sales values would have been more or less flat month-on-month.
There were 273 residential sales in September, down 27 percent from 375 in August and on the 500+ per month levels seen between March and June. More than half these transactions were accounted for by sales of land (rather than buildings), which gained in importance over the past couple of years.
Higher land sales may reflect moves by the government to develop new residential areas, lifting the attractiveness of nearby plots. Excluding land sales, transaction levels remain weak, but this is probably linked to seasonal factors.
The number of transactions in the investment segment fell for the fourth successive month in September, declining 13 percent from August to 71. Sales reaced, now, 67 perent below their May peak, though as described above, recent weakness is probably related to Ramadan and summer vacations.
The average transaction value - at KD539,000 - increased for the second month in a row and was above the average of KD 425,000 seen through 2008 and 2009, though this figure was distorted by one or two large transactions. Anecdotal evidence suggests that apartments remain a popular investment for nationals in light of low interest rates and stock market uncertainties.
There were three sales of commercial property in September, up from none in August.
Trading in this segment continues to be thin and has failed to witness a pick-up in 2010 comparable to that seen in other segments. Even the high number of sales seen in April was driven by one-off land sales rather than anything more long-lasting. Admittedly, in value terms commercial sales reached their highest level in more than three years, at KD 71 million. However, this figure was skewed by one exceptionally large transaction involving a commercial complex in southern Kuwait. Excluding this, sales would have been KD 14 million, only the fifth largest of the past year.
The NBK report concluded: The number of loan approvals made by the Savings and Credit Bank (SCB) fell by 23 percent in September, from 301 in August. This was the lowest number of approvals since last September, which was itself one of the weakest numbers of the last few years. As with property sales, low figures may have been linked to seasonal factors. But even so, approvals numbers have been trending lower since mid-2008, when they peaked at well over 500. This decline is likely connected to the sluggishness of the government's plot distribution program, to which SCB loan approvals are often linked. While the coming months are set to see a big pick-up in the number of plots distributed, it may take a while longer for that to filter into much stronger demand for SCB loans. - Kuna