05 March 2009
NEW DELHI: It seems that the price of rent will not join the general drop in the market as some real estate agents expected. The announcement aroused some controversy after reports issued during the last period predicted drops in the price of real estate.
ERA Kuwait Real Estate Director Jarrah Ibrahim Al-Saleh predicted earlier that local real estate prices would continue to fall throughout 2009. He reportedly expected supply to continue to exceed demand due to the continuity of the global economic crisis. An NBK report showed a retreat in the sales of real estate property in January 2009.
This is in the language of reports; however, actual market language is different. In interviews, real estate agents denied the fall of rental prices at the current time. However, they refused to compare the situation with Dubai, where the nature of investments is different. While Dubai openly encouraged large foreign investments, Kuwait, on the other hand, involved itself with a small number domestic investments. Any slump in Kuwait would take time to notice.
For Rent" signs can often be found on new, empty buildings. People passing by areas like Hawally and Salmiya may find many of them, and when inquiries are made about the rental prices, some may be surprised to find that prices range from KD 300 to 400.
Many may wonder why rents are still expensive if many of the flats are empty. Two main questions arise: Why are flat prices still high if the price of real estate dropped? If nobody is renting those flats, how do building owners pay their debts to banks?
A marketing officer from a large real estate company in Kuwait dismissed the drop in the price of real estate and said that Kuwait's traditional market could handle the current slump in real estate until markets recovered. Moreover, he maintained that the inability to rent certain units was isolated to certain areas that had constructed new buildings and that the high price of rent did not apply to other areas. He added that rent in those locations was high in order to cover the high cost of construction of those buildings. He explained the nature of the Kuwaiti market as small and said punctuated liquidity could easily cause inflation.
Though the asset value of those building have generally dropped, as reports indicated, real estate agents agree that demand is still present. If real estate value dropped, one large investor would make extensive purchases and raise prices again, he said.
A communications manager at a reputable bank said there was no problem with unsettled real estate debt. "Everybody is paying," he said. Whether the situation will keep going on like this depends on the implications of the stimulus plan, which many companies are waiting for. But in case it doesn't pass and borrowers don't settle their debts, the worst case scenario will allow banks to put their hands on the assets of companies in debt.
However, he said he expected real estate company heads to reach an agreement with the Central Bank of Kuwait to allow certain banks to work on rescheduling their debts. This would lead to higher company debt, but he said he saw it as a logical alternative to go with instead of facing the collapse of huge real estate companies.
NEW DELHI: It seems that the price of rent will not join the general drop in the market as some real estate agents expected. The announcement aroused some controversy after reports issued during the last period predicted drops in the price of real estate.
ERA Kuwait Real Estate Director Jarrah Ibrahim Al-Saleh predicted earlier that local real estate prices would continue to fall throughout 2009. He reportedly expected supply to continue to exceed demand due to the continuity of the global economic crisis. An NBK report showed a retreat in the sales of real estate property in January 2009.
This is in the language of reports; however, actual market language is different. In interviews, real estate agents denied the fall of rental prices at the current time. However, they refused to compare the situation with Dubai, where the nature of investments is different. While Dubai openly encouraged large foreign investments, Kuwait, on the other hand, involved itself with a small number domestic investments. Any slump in Kuwait would take time to notice.
For Rent" signs can often be found on new, empty buildings. People passing by areas like Hawally and Salmiya may find many of them, and when inquiries are made about the rental prices, some may be surprised to find that prices range from KD 300 to 400.
Many may wonder why rents are still expensive if many of the flats are empty. Two main questions arise: Why are flat prices still high if the price of real estate dropped? If nobody is renting those flats, how do building owners pay their debts to banks?
A marketing officer from a large real estate company in Kuwait dismissed the drop in the price of real estate and said that Kuwait's traditional market could handle the current slump in real estate until markets recovered. Moreover, he maintained that the inability to rent certain units was isolated to certain areas that had constructed new buildings and that the high price of rent did not apply to other areas. He added that rent in those locations was high in order to cover the high cost of construction of those buildings. He explained the nature of the Kuwaiti market as small and said punctuated liquidity could easily cause inflation.
Though the asset value of those building have generally dropped, as reports indicated, real estate agents agree that demand is still present. If real estate value dropped, one large investor would make extensive purchases and raise prices again, he said.
A communications manager at a reputable bank said there was no problem with unsettled real estate debt. "Everybody is paying," he said. Whether the situation will keep going on like this depends on the implications of the stimulus plan, which many companies are waiting for. But in case it doesn't pass and borrowers don't settle their debts, the worst case scenario will allow banks to put their hands on the assets of companies in debt.
However, he said he expected real estate company heads to reach an agreement with the Central Bank of Kuwait to allow certain banks to work on rescheduling their debts. This would lead to higher company debt, but he said he saw it as a logical alternative to go with instead of facing the collapse of huge real estate companies.
By Nisreen Zahreddine
© Kuwait Times 2009
