|
|
|
|
Sales overview
In its latest economic brief on the monthly statistics of registered real estate contracts issued by the Ministry of Justice (MoJ), excluding sales conducted through agents, National Bank of Kuwait reports that Real estate sales reached their highest level in 17 months in December, signaling a return in activity to pre-crisis levels. The total number of sales transactions (residential, commercial and retail) stood at 582, close to the monthly average of 590 recorded between 2003 and 2006 and what might be considered as ‘normal’ levels – though still far from the 800+ levels seen during the boom years.
This month, however, there was a divergence between the performances of the different market segments, with high numbers of residential transactions more than offsetting a dip in the investment and commercial segments. This – combined with the possibility that residential activity witnessed a spike in private land sales in December (see below) – argues for a degree of caution against over-estimating the pace of improvement.
<?xml:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />
In KD value terms, NBK noted that the figures were slightly less positive, with total sales dropping 15% in the month to KD 164 million, though the y/y comparisons keep improving. But this should be seen in the context of very sharp increases during the previous two months (linked to a few high value transactions in the commercial segment). In broad terms, the value of sales stands at a fairly high level – comparable to most of the numbers seen between 2003 and 2006. Most of this seems to reflect higher average values for each transaction rather than high levels of activity per se.
But signs of a general market recovery came too late to rescue the year as a whole. 2009 turned out to see the lowest number of transactions since recent records began in 1998, at an average of 382 per month. This represents a fall of 26% on 2008, which benefitted from relatively strong performance at the start of the year.
i) Sales – residential (mostly villas and land)
<?xml:namespace prefix = w ns = "urn:schemas-microsoft-com:office:word" />In the residential segment, the number of sales jumped to 476 from 379 in November. This was the highest level since July 2008. A look at the more detailed Ministry of Justice data suggests that there were an unusually large number (over 100) of land sales linked to the Khairan Pearl project – which may have provided a temporary boost to activity. Transaction levels may well fall back again in January. In fact, land sales (as opposed to actual homes) accounted for the vast majority of residential transactions this month (nearly three-quarters), possibly spurred on by recent government approval for the installation of infrastructure in certain areas.
ii) Sales – investment (mostly apartments)
NBK noticed that December saw 102 sales of investment property, a fall of 35% from 156 in November, which was a strong month. Despite the fall, the number of transactions in this segment remains at something like its historic level – holding up well through the financial crisis. This could reflect switching towards property as an asset class in light of disappointing stock market returns, as well as the benefit of sharply lower prices. Note however that after falling by around two-thirds from their peak in mid-2008, average selling prices rebounded sharply in December, returning more or less to pre-crisis levels for the first time.
iii) Sales - commercial
There were four sales of commercial property during December, down from 7 in November and an average of 6 per month for 2009 as a whole. Most of the transactions were plots of land rather than finished structures. The value of sales also dropped back to KD 1.4 million after spiking at above KD 5 million in October and November. This series is extremely volatile, with the size and quality of transacted assets varying considerably each month. But in general, commercial sales continue to be hampered by weak demand, constrained financing conditions and perhaps a preference for more liquid assets on the part of investors.
Savings and Credit Bank loans
NBK also noticed that the number of loans approved by the Savings and Credit Bank (SCB) rose for the third successive month in December, reversing part of the dip earlier in 2009. Total loan approvals stood at 354, 13% higher than in November and up from a low of 229 in September. The broader picture remains fairly flat, however, with the number of loans below their monthly 2004-08 average of 395. The value of loan approvals remains weak, at KD 9.2 million, down 34% on a year ago.
Slow activity stems from weakness in loans for the purchase of properties, which at 141 has collapsed from a peak of more than 400 in mid-2008. By contrast, the number of loans approved for additions and renovations continues to rise, reaching a record high of 213 in December. There are hopes that the number of loans for purchases will be revived over coming months as the government’s program of land distribution accelerates, with new plots being allocated in the North-West Sulaibikhat and Sabah Al Ahmed areas.
As with the sales transactions, 2009 as a whole was a subpar year, with an average of 371 loans approved per month, down 10% on the average for 2008.
