2019 KUWAIT P R O P ERTY MA R K ET R EP ORT AND REVIEW OF 2018
2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
ABOUT CAVENDISH MAXWELL The MENA region’s leading independent firm of property consultants and chartered surveyors. Established in 2008, Cavendish Maxwell is one of the largest and most respected property consultancies in the region. An influential partner and trusted advisor to key stakeholders in real estate markets throughout the Middle East and North Africa, we offer a comprehensive range of exceptional property services across a diverse mix of sectors and asset classes. Cavendish Maxwell is a fully certified member firm of the Royal Institution of Chartered Surveyors (RICS), bringing together a world-class team of handpicked property consultants and surveyors, unmatched elsewhere in the region. Our team of highly qualified professionals are trusted by real estate market stakeholders throughout the Middle East and Africa, including international and domestic banks, property developers, governments, owners and investors, asset managers and professional services firms. We service a diverse mix of specialist property sectors including retail, offices, hospitality, healthcare, education, industrial and logistics. Cavendish Maxwell also publishes independent reports, prepared to globally accepted standards, for loan security, bank lending, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, purchase and sale advice, and third-party reliance purposes.
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2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
FOREWORD Kuwait’s economy is still largely driven by its oil sector. In 2018, it accounted for approximately 55% of the country’s total Gross Domestic Product (GDP). Some efforts have been made to diversify – especially in light of the 2017 market slump that was a consequence of the OPEC deal to cut oil production – and this has been largely positive, with the nonoil sector growing at a compound annual growth rate (CAGR) of 4% from 2010 to 2018. Various segments of this non-oil sector, including the property market, have been affected by regional dynamics, global trade, government spending on infrastructure projects and, of course, oil prices. In our first analytical overview of the Kuwaiti property market, we explore how the residential, retail, office, industrial and hospitality sectors fared in 2018, until Q1 2019. Kuwait’s residential property market, divided into residential (villas) and investment (apartment) asset types, saw strong transaction values and volumes in 2018, compared to 2017. Given that freehold is unavailable for expatriate buyers, the increase in sales is a positive sign for the local market. However, a large number of upcoming apartments are expected to add to the supply, putting downward pressure on rents. Monthly rents started at an average of KWD 200 for studios, climbing to KWD 1,200 for 3-bedroom units. Meanwhile, the retail sector in Kuwait has been largely successful, unburdened by a dependence on tourists. The number of high-end brands entering the market to cater to the high purchasing power of Kuwaitis has also increased, boosting retail growth and paving the way for new malls and retail hubs in the country. For offices, the oversupply of space and lower demand – a consequence of challenging market conditions in the region – continued to impact the sector. New government measures introduced by Kuwait’s Ministry of Commerce and Industry, such as the launch of an electronic system for the issuance of commercial licences, are expected to encourage increased business activity. Meanwhile, Kuwait’s ambitious plans of developing five new island destinations – Bubiyan, Warba, Failaka, Maskan and Aouha – as part of the New Kuwait Vision 2035 plan, are expected to boost hospitality and tourism numbers in the long term.
CONTENTS 04
Macroeconomic Overview
06
New Kuwait Infrastructure Projects
08
Residential Market Overview
10
Upcoming Supply
11
Retail Market Overview
12
Office and Industrial Market Overview
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Hospitality Market Overview
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A Word From our Chief Economist
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KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
MACROECONOMIC OVERVIEW
Accounting for almost 10% of the world’s oil reserves, Kuwait’s GDP is largely dependent on this sector, with petroleum generating nearly 95% of all export revenues and government income. As of 2018, 55% of Kuwait’s total GDP came from oil, and from 2010 to 2018, the sector registered a CAGR of 1%. However, in this same period, the non-oil sector grew by 4% CAGR. The GDP per capita in 2017 was KWD 8,712. Kuwait continued to encourage Foreign Direct Investment (FDI) with the implementation of new laws and regulations. The share of FDI in 2017 represented roughly 41% of total foreign investments into Kuwait. Ease of doing business, human capital, innovation, resilience and agility has steadily improved in Kuwait, according to the World Economic Forum’s research. The country is currently ranked 54 out of 140 nations in the Global Competitiveness Report. A raft of public infrastructure projects, part of the New Kuwait Vision 2035 plan, has been proposed, with many under construction and set to complete over the coming years. This includes the 48.53 km Sheikh Jaber Causeway, designed to link Kuwait City with Subiyah New Town; the KWD 908.4 million Kuwait Metro, with a link to Nuwaiseb on the Saudi Arabian border and a 153 km-long line linking Kuwait City with Boubyan Port; the Al-Zour Refinery, expected to commence operations in 2020; a new terminal at Kuwait International Airport, expected to be completed by 2022; and other major roadworks projects.
10%
45 40 35 30 25 20 15 10 5
2010
2011
7%
1%
1%
1%
4%
-3%
-0%
2012
2013
2014
2015
2016
2017
2018*
Kuwait GDP
12% 10% 8% 6% 4% 2% 0% -2% -4%
Growth Rate
*Projected from 2017 data. Source: 2010 - 2017 World Bank, 2018 data from Kuwait Central Statistical Bureau
GDP CONTRIBUTION BY SECTOR IN 2018
27%
Extraction of crude petroleum and natural gas and service activities incidental to oil and gas
9%
Others Education Public administration and defense
7% 4% 3% 1% 1%
Financial intermediation Hotel and restaturant 48%
Construction Source: Central Statistical Bureau
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Wholesale and retail trade
Growth rate %
KWD billions
TOTAL GDP IN 2010-2018 (KWD BILLIONS)
2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
GDP PER CAPITA IN 2017
FDI IN KUWAIT IN 2013-2017 3,200
14,000
KWD millions
10,000 8,000 6,000
3,000 2,800 2,600
4,000 2,000
12,210
8,712
7,122
6,255
4,580
UAE
Kuwait
Bahrain
KSA
Oman
2,400
3,018
2,948
2,716
3,073
3,105
2013
2014
2015
2016
2017
Source: World Bank Data
Source: Central Statistical Bureau
POPULATION OVERVIEW
According to the Central Statistical Bureau of Kuwait, the total population was 4.6 million at the end of December 2018, an increase of 5% since 2011. Of this, 70% (roughly 3.2 million) were expatriates, while the remaining 30% were Kuwaiti nationals. Between 2011 and 2018 the country’s male population grew by a CAGR of 6.8%, while the female population grew by a CAGR of 2.8%.
POPULATION GROWTH IN 2011-2018 3.0 Population millions
KWD
12,000
2.5 2.0 1.5 1.0 0.5
1.3 1.8
1.4 1.9
1.5 2.0
2011
2012
2013
1.5 2.1 2014 Female
1.6 2.3
1.6 2.4
1.6 2.5
1.6 2.9
2015
2016
2017
2018
Male
Source: Central Statistical Bureau
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KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
NEW KUWAIT INFRASTRUCTURE PROJECTS The New Kuwait Vision 2035 plan is a unified strategy to transform Kuwait into a financial, cultural and institutional leader in the region. The plan encompasses sweeping changes to affect the goals listed in the vision, and also accommodates provisions for new infrastructure projects across the country. While many projects are already underway, with estimated completion times over the next few years, others are multi-phase developments expected to be completed by 2035.
CLEAN FUELS PROJECT Expansion and upgrade of Mina Abdullah and Mina Al-Ahmadi refineries into an integrated refining complex with a capacity of 800,000 barrels/day.
SHEIKH JABER AL-AHMAD CULTURAL CENTRE
JABER AL AHMAD AL JABER AL SABAH HOSPITAL
Also called the Kuwait Opera House, the centre is a multi-disciplinary public space for music, theatre, film and literary events.
New hospital regarded as the largest in the GCC, with 1,168 beds, 36 operation rooms, a medical centre, helipads and a parking lot for 5,000 vehicles.
AL-ZOUR REFINERY Among the largest refineries in the world when complete, it will produce 615,000 barrels/day, supplying low-sulphur fuel.
SOUTH AL-MUTLAA CITY PROJECT New project to house 400,000 residents, with 116 schools and 12 public health centres.
2016
Completed
6
2017
Under Construction
2018
2019
2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
SABAH AL SALEM UNIVERSITY CITY New university city project covering 6 million sq m, including student hostels, health sciences centre and the main campus with supporting facilities and services.
JABER CAUSEWAY
AIRPORT EXPANSION
Major roadwork project connecting new island projects to mainland Kuwait.
New terminal at Kuwait International Airport.
2020
2021
2022
MUNICIPAL SOLID WASTE TREATMENT The Kabd site will utilise the latest technology to convert municipal solid waste into energy to protect the environment and land resources.
2031
Source: New Kuwait
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KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
RESIDENTIAL MARKET OVERVIEW
Kuwait’s residential property market is divided into residential (villas) and investment (apartments) types. With a lack of freehold options available for expat investors and buyers, all properties are rented by expats in Kuwait. There are no zonal or community-based restrictions on where expats can live. The top areas to live in Kuwait in 2018 were Kuwait City, Salmiya, Salwa, Jabriya, Fintas and Mahboula. Sales, particularly in the investment category, have been strong since the downturn in 2017. Rising prices and an increase in the volume of transactions indicated positive performance in 2018. More stable rents also contributed to the rise in sale prices for both apartments and villas.
APARTMENTS
APARTMENTS
KWD 200-1,200
KWD 230-750 VILLAS
VILLAS
KWD 700-2,500
KWD 700-2,000 APARTMENTS KWD 200-850 VILLAS KWD 600-2,250
APARTMENTS KWD 300-750
Salmiya
Kuwait City
VILLAS KWD 850-2,500
Jabriya Salwa
MONTHLY RENT BY BEDROOM LEVEL * Data as of March 2019 (Active listings) VILLAS 2 BR - 4 BR
3 BR - 4 BR
APARTMENTS Studio - 3 BR
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1 BR - 3 BR
3 BR - 5 BR
2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
AVERAGE QUARTERLY TRANSACTION SALES, VALUES AND VOLUMES IN 2015-2018
SALES (KWD MILLIONS) 2018
2017
2016
2015 0
50
100
150
200
250
300
350
400
600
700
800
TRANSACTION VALUES (KWD THOUSANDS) 2018
2017
2016
2015 0
100
200
300
400
500
900
NUMBER OF TRANSACTIONS 2018
2017 APARTMENTS KWD 200-900 VILLAS
2016
KWD 750-2,500
2015 0
Fintas and Mahboula
100 200 200
Residental
300400 400
500 600 600
700 800
800 1000 900
100012001200
Investment
Source: NBK / Cavendish Maxwell
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KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
UPCOMING SUPPLY Several projects are scheduled for completion in Kuwait in line with the New Kuwait Vision 2035 plan. This includes major mixed-use developments including Tamdeen Square in Sabah Al Salem, and Al Andalous Complex in Hawalli. Commercial and residential projects include the proposed Al Basma Tower in Kuwait City, and Al Warba Island Residential Tower on Al Warba Island. Kuwait also plans to build several master plan communities, including Silk City, which will be connected to the mainland by the under-construction Sheikh Jaber Causeway and eventually host an estimated 700,000 people in residences, offices, hotels and entertainment facilities. Plans are also underway to transform Failaka Island in the south into a premier leisure and tourist destination, taking advantage of its importance as a heritage and archaeological site. Meanwhile, the proposed Bubiyan Island Development will be home to a new seaport in the north and resort complexes along its southern beaches. With an aim to create new living spaces for workers, Kuwait is developing the Southwest Al Jahra Labour City project, which will eventually house 20,000 workers and provide community, municipal and utility services.
Warba Island Residential Tower
Bubiyan Island Development Silk City Failaka island Development
Al Basman Tower Al Andalous Complex Southwest Al Jahra Labour City
Tamdeen Aquare
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KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
Souk Sharq Assima Mall
Al Andalous Complex
Marina Mall
The Avenues Mall
360 Mall Existing malls
Lulu Hypermarket
Al Kout Mall
Upcoming malls
RETAIL
MARKET OVERVIEW Kuwait’s retail market is widely viewed as the most robust and successful in the region, after Dubai, UAE. The Avenues Mall in Kuwait City is currently the largest mall in the region, after The Dubai Mall, and there are over 50 malls of varying scale, quality and tenant mix in the country. Older malls such as Marina Mall and Souq Sharq continue to perform well, even with new retail hubs, including Avenues in Al Rai and Fahaheelin the south of Kuwait City, adding to the competition. The newly expanded 360 Mall, with a tennis complex, is also expected to open its doors later this year, adding an estimated 30% increase in footfall and bringing total visitor numbers to over 18 million. Approximately 799,000 sq m of leasable floor space was available as of 2017, and there has been a rise in the number of high-end brands entering the Kuwaiti retail space as a result of citizens’ high spending power. Unburdened by a reliance on tourism, Kuwait’s retail sector has remained largely insulated from the retail downturns seen in other parts of the GCC.
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2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
OFFICE AND INDUSTRIAL MARKET OVERVIEW
Unlike the residential and retail markets, Kuwait’s office market performance has been less than robust. In the aftermath of the second Gulf War, planning permissions for over 1 million sq m were approved, which eventually led to the issue of oversupply starting to impact the office market in 2010. A large amount of office space was then delivered in 2011 and, coupled with limited demand due to the overall downturn in the region, the office market continues to struggle. The government has taken measures to encourage business activity, such as the launch of an electronic system for the issuance of commercial licences by the Ministry of Commerce and Industry. Sharq, downtown Kuwait City and Salimiya are the new office areas, with new projects either completed, available for rent, or expected to be completed in the short to medium term. The only free trade zone in Kuwait, Shuwaikh, was also shut down in 2019 after a decision by the Council of Ministers to cancel the programme.
AVERAGE QUARTERLY TRANSACTION SALES, VOLUMES AND VALUES 2015-2018 SALES (KD MILLIONS)
NUMBER OF TRANSACTIONS
2018
2018
2017
2017
2016
2016
2015
2015 0
20
40
60
80
100
120
140
160
5
2018
AREA
2017 2016 2015 1,000
2,000
Commercial
3,000
4,000
5,000
6,000
10
15
20
25
30
35
COMMERCIAL RENTS FOR OFFICES IN POPULAR LOCATIONS
TRANSACTIONS VALUE (KD THOUSANDS)
12
0
7,000
MONTHLY RENT (KWD) SIZE (SQ M)
Kuwait City
225-2,200
16-400
Salmiya
300-1,400
25-300
Hawally
250-2,200
25-300
Source: NBK / Cavendish Maxwell
2019
KUWAIT PROPERTY MARKET REPORT AND REVIEW OF 2018
HOSPITALITY MARKET OVERVIEW
As part of the New Kuwait Vision 2035 plan, the government is set to embark on the creation of five island destinations – Bubiyan, Warba, Failaka, Maskan and Aouha – along with the previously mentioned Silk City project. The total land area for these projects will span 973 sq km, of which Bubiyan Island will cover 863 sq km. Warba Island is the next largest project, covering an area of 37 sq km. The proposed tourism and leisure destination of the historic Failaka Island will span 12 sq km, while the smaller islands of Maskan and Aouha will cover 750,000 sq m and 350,000 sq m respectively. Kuwait currently has more than 70 hotels and this number will grow as more projects, such as the new aforementioned developments are realised. According to Tri Consulting’s HotStats data, Kuwait’s hotels recorded a 1.7% decrease in occupancy rates, from 54.5% in 2017 to 52.8% in 2018. The revenue per available room (RevPAR) also declined from approximately KWD 38 in 2017 to KWD 35 in 2018.
Aqua Park
JW Marriott Hotel Kuwait City Entertainment City
Condrad Hotel
Novotel Sharq
Ice Skating Rink
Swiss-belboutique Bneid Al Gar Four Seasons Hotel Kuwait Radisson Collection Hotel Sheraton Kuwait
The Scientific Center Holiday Inn Kuwait Grand Hotel
Kuwait Zoogical Garden
Grand Hyatt
Jumeirah Messilah Beach Hotel & Spa Kuwait
Existing Hotels Upcoming Hotels
Hilton Garden Inn
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A WORD FROM OUR
CHIEF ECONOMIST The continuing relative strength of the Kuwait residential market demonstrates that the hallmark of the market is relative stability. The evidence for stability is considerable. First, population growth at around 2% annually is relatively steady, driven not only now by migration but also increasing life expectancy. Growth in airport traffic was 8% in 2018, following 17% growth the previous year. Second, Kuwait’s robust politics themselves are an indicator of political stability. So too the US State Department advises that ‘There is minimal risk from crime in Kuwait City’[1]. These are not negligible factors encouraging real estate market stability. Third, policy has been aimed at the same objective: policymakers have consistently emphasised the importance of restrictions on speculative development and accompanying hot capital. The decision to begin the transition to a taxation-based economy, too, was a widely-admired fiscally conservative decision which will protect government revenues in the long-term. At times like these, the attractiveness of these conservative policies is quite evident. From an investment horizon standpoint, mainly over the next decade, oil dependence is manageable, given steady diversification in the economy and the general trajectory for oil prices in the short to medium term. This is especially the case in respect of healthcare where Kuwait has a comparative advantage, where dozens of projects are under development, both in the public and private sector. A steady growth in tourism can also reasonably be expected. Even more remarkable, stability in the Kuwaiti residential real estate market has been achieved without the introduction of a comprehensive freehold law, although the decision of 2015 to allow strictly controlled expatriate ownership of apartments will undoubtedly have helped to put a floor under local demand. Stress on the local office market reflects more strategic considerations of office use as well as the building output of recent years, whilst the continued relative buoyancy of the retail sector reflects more on constrained supply than any expectation that Kuwait will be immune to the e-commerce trend of the region. The only question mark must be over the rapidity of the development of Silk City, where the first phase alone is scheduled to cost US$ 86bn. All the evidence of recent years suggests that caution and phasing should be the hallmark of any development dependent on the scale that has been planned. Kuwait is not a market for speculators, and never has been, but its fundamentals seem unlikely to be threatened by downturns elsewhere in the region and its claim to represent a ‘safe harbour’ for regional real estate investment now looks stronger than ever. Only a precipitate and prolonged collapse in oil prices, or too rapid a speculative development of Silk City, could derail this assessment over the next few years.
JULIAN ROCHE CHIEF ECONOMIST
[1] https://www.osac.gov/Pages/ContentReportDetails.aspx?cid=25754 Kuwait 2019 Crime & Safety Report - osac.gov www.osac.gov The current U.S. Department of State Travel Advisory at the date of this report’s publication assesses Kuwait at Level 1, indicating travelers should exercise normal precautions.. Overall Crime and Safety Situation. The U.S. Embassy in Kuwait City does not assume responsibility for the professional ability or integrity of the persons or firms appearing in this report.
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STRATEGIC CONSULTING AND RESEARCH Cavendish Maxwell’s strategic consulting and research team has some of the region’s most highly qualified data analysts with a wealth of international real estate advisory experience. We work closely with a broad portfolio of banks, property developers, government entities and private clients, providing authoritative, industry-specific research and advice to maximise portfolio performance.
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Our strategic consulting and research expertise spans a variety of sectors including residential, office, hospitality, education and mixed-use developments, and our team draws on reliable proprietary data to allow for thorough and accurate analysis of trends and market fluctuations.
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Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.
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