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Pressure On Rents As 37000 Apartments Vacant
The real estate market, which saw a softening in early 2017 with sales falling to KD180 million, appears to be continuing its lethargic performance.
Latest data from the real estate sector reveals that the number of apartments lying empty since the start of the year has nearly doubled from 20,000 to over 37,000 at the end of April. With more than 10,000 residential apartments poised to enter the market during the second half of the year, the situation is likely to be further exacerbated.
According to a report released last week by Kuwait International Bank, residential property deals in Kuwait declined by 42 percent in April compared to March due to sluggish market activity, with recovery depending on oil price rise.
A total of 305 deals worth KD89 million were registered in April, compared to 528 deals, valued at KD51 million, in March. Average deal value also fell by 27 percent compared to last month, reaching KD291,000 per deal, the bank said.
Sales in investment sector fell by 42 percent quarter-on-quarter and 51 percent compared to the previous year, reaching KD42 million. The sector registered 60 deals compared to 81 deals the month prior, with average deal value falling to KD706,000 per deal.
The number of investment apartments lying vacant is cause for serious concern. One of the main reasons behind this problem is the oversupply of residential apartments, which is believed to be much higher than the demand. The investment sector witnessed a rapid growth in the past two years. According to data from PACI, there are more than 13,000 investment residential buildings in Kuwait, a number that is considered high for a market the size of Kuwait.
Another probable reason for the increase in empty apartments is the increase in number of expatriates who are deciding to send their families back to their home countries. The average cost of around KD300 for an apartment is no longer viable for many expatriates, and with salaries remaining unchanged, the increase in cost of living is driving the exit of many expatriate families. Upcoming school closings and summer holidays are only likely to increase this exodus.
Obviously, owners of the 17,000 apartments currently lying unoccupied will be hard pressed to find new occupants in the coming months.Â
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