Speculation over investment properties indicated an expected fall in rent in Kuwait by approximately 20 percent in 2018, given the oversupply and low demand that could affect the real estate market. I think rentals will continue to drop after unjustified increases over the past few years, with a noticeable decline of between 30 and 50 percent in some areas amid the absence of any indications of the possibility of rising again soon, for several reasons.
The first reason is supply exceeds demand. The second main and obvious reason is the impact of the government’s policies of rationalizing spending, thus lowering the standard of living of some families by curbing salaries. There is constant pressure on expat families, which means that the father chooses to remain alone in Kuwait and sends his family to his home country to control and reduce expenses. Therefore, there will be no need for a large apartment, and a studio or shared apartment with friends will be enough and cheaper.
I believe that the increasing on pressure on expatriates and imposing more fees on them has contributed to the departure of some expatriate families and led to the fall in rent automatically. In the last few months, rent in some private housing areas decreased by more than KD 100. I think the beginning of the school year after summer, for example, is an opportunity to measure any decline, the possibility of stability or a return to rising rent values.
Also, the availability of government housing for citizens and the reduction of the waiting period mean that the number of tenants will be fewer, and more flats will be vacant. According to an international real estate appraisal report, the introduction of new electricity and water tariffs and the rising cost of living by the end of last year led to the displacement of a large segment of the tenants to cheaper places.
The fall in investment property prices definitely worries real estate owners, but banks too are closely monitoring this decline, because it may affect some borrowers. This is normal in the absence of a clear coordination between the parties – those who are benefiting from stability in real estate prices and the government with its policies in dealing with expat families, who need to live in large apartments.
I believe the owners of real estate need to determine a common rent value, taking into account the situation in the country and the effects of government policy on families, especially expatriates. I agree that no landlord wants to keep apartments empty for a long period, but keeping rentals in balance is better than keeping flats empty with no gain for anyone.
By Muna Al-Fuzai