EXCPR™: TRADING PRICES FOR ALMASAYEL AREA IN THE STATE OF KUWAIT

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.