REAL ESTATE ECONOMICS
TRADING PRICES FOR
ALMASAYEL AREA IN THE STATE OF KUWAIT
Case study
All agrees that the prices of real
estate trading in the state of Kuwait have become the highest in the world, for
various reasons including the scarcity of supply and increased demand, in
addition to the purchasing power of citizens. The trend towards investment in
residential property has also inflated the value of the transactions for these lands
in different regions of Kuwait. In this regard, EXCPR Consulting and Business
Management Co. , highlighted this axis and dropped it on one of the regions of Kuwait
- Almasayel - as a case study, which is expected to be applied to the rest of
Kuwait in the coming period. The aim of this study is to link the economic
aspect in the lands trading in Kuwait, educate citizens about these results
achieved, in addition to monitoring these indicators, and presenting them to
decision makers and officials in the state, in order to take care of this
issue. This study includes changes in the prices of lands in the Almasayel
region, annual trading volumes in the region, as well as trading prices against
the quantities offered in the market - economic status.
As is well known, the Almasayel area is
located in the center of Kuwait in the Arabian Gulf, which belongs to The Great
Mubarak Province - one of the six provinces in the country, where the building
permit was submitted in 2012, after it was converted into a private residential
sector, and provided with the necessary infrastructure. The study indicates
that the total number of housing units in the area reached 374 housing units
with areas ranging from 375 to 500 square meters per unit, divided into five
different pieces. The results also show that the number of apartments in the
area of Almasayel has become about 180 apartment with an average price of USD 1,810
per month.
CHANGE
IN PRICES’
As shown in the following figure, the
rate of increase in the prices of residential areas increase during past 7
years has been 50.6%, a growth rate of 7.2% year-on-year. The price per square
meter in the region in 2019 reached USD 2,100, up from USD 1,730 at the
beginning of 2012. As an example, the 400-meter land in 2012 was priced at USD 700,000,
which is now trading at prices starting from USD 970,000, an increase of USD
270,000. The Almasayel region, like other regions of Kuwait, was also affected
by the economic recession that hit the real estate sector in 2014, with the
price per square meter falling from USD 3,300 to USD 2,200- by 35% in 2014. As
shown in the same figure, the index of the bullish trading in the Almasayel
region was on an upward trend and grew by 1.3% per annum.
CURRENT UNITS
The volume of trading on residential lands
in the Almasayel area has changed significantly during the previous period.
Trading at the beginning of 2011 was settled only 27 times during the year due
to the lack of all services and infrastructure in the area, making those
seeking private housing regardless of it and looking for other residential
areas. However, demand for the region quickly increased, with trading up to
August 2019 rising to 112 during the year, an increase of 314%. As the results
of the report prepared by EXCPR Consulting indicate, the total trading on real
estate in the Almasayel area over the past 7 years has reached 697 times, with
a trading rate of 100 times per year, equivalent to 8 times during the month.
The largest trading on the property was based on Area no 5 and Area no 1, valued
367 times and 359 times- respectively. It is worth mentioning here that the
early years of trading in the Area of Almasayel were based on specific
residential pieces, namely Area 3, 4, and 5, while at the beginning of 2017
residential lands began to be in significant trading, which was soon followed
by Area 1 - at the beginning of the 2018. As shown in the following figure,
2018 was the peak for real estate trading in the region, which reached 218, it
compensated for the stagnation in trading in the years leading up to that
period - the period of the real estate recession in 2014. In general, we
see the growth in trading over the past seven years in the Almasayel
region.
ECONOMIC RELATIONSHIP
Over the past 7 years, approximately 224
villas have been built and constructed in the Almasayel area, accounting for
60% of the total lands in the region, bringing the remaining volume of lands to
approximately 150 lands of different sizes. As is known in the economic base,
the lower the supply in the market, the more likely it is that prices will
increase significantly, if we exclude other external factors. The results also
indicate that the turnover rate per earth in the Almasayel area was three
times, meaning that the number of owners per land was three in the past 7 years
-speculative rate. As shown in the following illustration, when there is a
scarcity of residential land on the market, property prices rise to an average
of USD 2,340 per square meter. While the supply of residential land in the
Almasayel area increases, prices usually drop to USD 2,000 per square meter, a
decrease of up to 16.4%.
Finally, supply and demand are the basis
for economic theory, and that the less supply, the higher the price of
residential property, and therefore lower the purchasing power of citizens, and
eventually to reach the stabilization stage. As concluded by this report, more
than 60% of residential lands were exit the total market, the chance of continued
price increases during the next phase would be highly probable, which may
exceed the standard prices in 2014 - the price of a 400-meter residential land
is 1 Million USD. The role of the government sector is also important in this
period, to revive the economic movement, by providing more residential land for
citizens, thereby redesigning the relationship between trading prices and
purchase quantities, and achieving a balance between supply and demand,
especially if we know that the population growth in the country Kuwait is at a
rate of 5% per annum.
The role of the government of the state
of Kuwait is also important in this case, in order to maintain the prices of
the residential real estate sector from overlapping investment, and thus to
maintain prices in light of the purchasing power of citizens. The role of the
financial entities - private banks and Credit Bank of Kuwait - also plays a
role in meeting the needs of citizens in the financial capacity to revive the
real estate sector and meet the basic needs of individuals.
Remark
An earlier report was published on Sep.
2018, we find this relationship ingrained and clear during this period for the
precious gold metal metal metal, which jumped significantly on the world market
in just 3 months from USD 1,312, to reach today trades of USD 1,562 per ounce -
with a growth rate of 19.1%, and that these prices, the standard is in line
with the historical prices of gold metal in April 2011. As this report of EXCPR
Consulting, there is a direct correlation between the growth of gold metal
prices and the trading of the residential real estate sector in Kuwait, which
demonstrates the activity of the residential real estate market in Kuwait since
mid-2018 until now, which is expected to continue in the short period coming at
least. The following figure shows the shape of this relationship between the
two indicators - the shift shape for one month. Therefore, we advise investors
and business people interested in the real estate market to rely on the gold
price index as dashboard to find out the most appropriate times to buy and
invest in the local property, or to sell and exit from it.
EXCPR™
for Consultancy & Business Management
P.O.
BOX 21407 – Safat 13075 Kuwait
Tel:
+965 600-39277
Fax:
+965 224-78734
Email:
info@excpr.com
Website:
www.excpr.com