Since I came back from Kuwait, I thumbed through the real estate publications I picked up on the housing market in Kuwait; and I thought to myself here we sit in a slump housing market and Kuwait is going gangbusters!! As evidenced by the construction cranes littering the skyline, with the market growing by 57% in value over the first two quarters of 2007 compared to the same period of time in 2006.
It is amazing but over 1,000 sales transactions were recorded last month, with an estimated value of approximately $855m, one of the highest amounts on record.
The lack of available land has also driven up prices and value of transactions. The vast majority of the land in Kuwait is owned by the government. The scarce supply has sent costs skyrocketing. According to figures from Alargan, a Kuwait-based property developer, land accounts for over 50% of the cost of a finished project, far higher than the standard 15 to 25% range.
Despite the increased volume, residential construction has failed to keep pace with the high demand. The number of building permits issued has shown a steady rise over the past few years, growing from around 2600 in 2004 to well over 3000 in 2006. But, up until recently, only a few units were making it to the market. In the ten years prior to 2006, only 19,000 new units were released for sale.
While Kuwait's construction industry is one of the most robust in the region, it faces cumbersome government procedures and material costs. Currently in the pipeline, there is over 70,000 units due to come online.
Demand for low and middle-income housing has grown at a strong pace, pushed in large part by the growing number of foreign workers.
