Real Estate And Construction Sector Credit Declines

Kuwait Finance House reports that credit allocation to the real estate and construction sectors declined 0.5% at the end of the second quarter of 2023. However, compared to the same period in 2022, it marked a notable increase of 2%, reaching a total of over 11.6 billion dinars. This amount represents 1% of the total credit granted balance, which accounts for 24.8% of all credit allocated across various economic sectors. The report also highlighted a consistent yearly rise in credit allocation across most economic sectors, reported Al-Qabas Daily.

At the end of the first quarter of 2023, the growth of credit directed to individuals slowed to 18.5 billion dinars, up 41.5 million dinars only, while by the end of the second quarter 2022, it had increased by 3.8%, despite a slowdown in the growth of installment credit facilities of 4%.

Approximately 33.8% of the granted credit goes to individuals who wish to build housing units in the private housing sector, and their balance exceeds 15.8 billion dinars.

According to the report, credit facilities for real estate activities have continued to rise, resulting in a growth in bank credit of approximately 2.5% since the second quarter of 2022, reaching approximately 46.9 billion dinars by the end of May 2023.

In the third quarter of 2023, the balance of credit facilities directed to real estate activity exceeded 24.6 billion dinars, unchanged from the first quarter, and therefore the percentage increase slowed down to 3.2% from the second quarter of 2022. These balances represent 58.6% of banking credit facilities.

Private housing:

- Real estate transactions for private housing decreased to 363 million dinars, a 3% drop from Q1 2023, and a 32% decrease annually.

- Average transaction value for private housing increased to 490 thousand dinars in Q2 2023, up 2.7% quarterly and 11% annually.

- Number of deals traded in private housing reached 742 in Q2 2023, a 5.1% decrease from the previous quarter and 38% decrease year-on-year.

Investment real estate:

- Value of investment real estate transactions declined to 200 million dinars in Q2 2023, down 22% from Q1 2023 and 36% annually.

- Average transaction value for investment properties decreased to 715 thousand dinars in Q2 2023, a 14% decrease from the previous quarter and 13% decrease annually.

- Number of investment real estate deals reached 280 in Q2 2023, a 9% decrease from the previous quarter and 26% decrease annually.

Commercial real estate:

- Value of commercial real estate transactions was 114 million dinars in Q2 2023, up 19% from Q1 2023, but 60% lower than Q2 2022.

- Average transaction value in commercial real estate was 5.7 million dinars, an increase of 12.7% over Q1 2023 and 80% higher annually.

- Number of deals in the commercial sector increased to 20 in Q2 2023, a 5.3% increase from the previous quarter, but fell 78% year-on-year.

Inflation levels:

- Kuwait’s price index recorded 129.4 points by May 2023, with an inflation rate of 3.7% annually, lower than 4.5% in Q2 2022.

- Housing registered an annual inflation rate of 2.6% in May 2023, amid uneven increase in price levels across index components, especially in services.

 

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