Local banks have reported a significant decline in financing provided to the residential sector, with a consolidated monthly decrease of 38.6 percent or approximately 766.1 million dinars. This drop is substantial, bringing the financing from 1.85 billion dinars during the first seven months of 2022 down to 1.08 billion dinars for the same period in 2023, as per data from the Central Bank of Kuwait for July.
Interestingly, these financing figures saw a month-on-month increase of 29.4 percent, rising from 133.6 million dinars in June to 172.9 million dinars in July. However, on a year-on-year basis, there was a 17.5 percent decrease, equivalent to 36.8 million dinars, down from 209.7 million dinars in July 2022.
Housing financing encompasses long-term personal loans with a maximum duration of fifteen years, offered by banks to customers for the purpose of purchasing, constructing, or renovating their private residences.
Unlike many other sectors that were impacted by the COVID-19 pandemic, the private housing sector has continued to thrive, witnessing a substantial increase in prices over the last three years due to high demand and limited supply. This sector has maintained its momentum and growth, remaining unaffected by the pandemic.
In contrast, the total accumulated financing balance provided by local banks to the housing sector experienced a 3.9 percent year-on-year increase, reaching 598.9 million dinars. This balance grew from 15.74 billion dinars in July 2022 to 15.885 billion dinars in July 2023, marking a 0.4 percent increase compared to June 2023, when the balance was 15.82 billion dinars.
The financing balance exhibited consistent growth throughout 2022, starting at 14.390 billion dinars in December 2021 and steadily climbing to 15.74 billion dinars by December 2022. The trend continued into 2023, with the balance reaching 15.827 billion dinars in May.
Over the past five years, the housing financing balance provided by banks has surged by 30.3 percent, amounting to about 4.767 billion dinars, from 10.972 billion dinars in December 2017 to 15.74 billion dinars in December 2022.
On the other hand, financing for “private and model housing” witnessed a 1.8 percent monthly decrease, falling by 5.6 million dinars from 306.2 million dinars in June to 300.6 million dinars in July. On an annual basis, this financing decreased by 6.8 percent, down from 322.8 million dinars in June 2022.
Real estate experts have confirmed that the Kuwaiti real estate market remained stable during the first half of 2023. Despite a continuous rise in housing prices, with the average price per square meter of private residential land increasing by 16.4 percent in 2022 to 1,274 thousand dinars, liquidity in the private housing sector decreased by 32 percent in 2022 compared to 2021. Contracts and agency volumes amounted to approximately 2.009 billion dinars, contributing only about 53.4 percent to the market liquidity, a decrease from its 2021 contribution of 75.1 percent. Meanwhile, investment housing activity witnessed a 43.3 percent increase to about 1.116 billion dinars, contributing approximately 29.6 percent to market liquidity, compared to 19.8 percent in 2021.
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