The real estate market in Kuwait recorded the weakest January sales since 2011 which fell to KD214 million ($715 million) mainly due to a poor contribution from the residential sector, according to a report.

A rocky start to the year for financial markets and heightened risk aversion appeared to put added pressure on real estate activity as activity remained soft in January, stated the National Bank of Kuwait (NBK) in its report.

Also, the recent spike in volatility in oil and equity markets has made investors all the more cautious following a slowdown in real estate activity last year, it stated.

Nonetheless, price performance was somewhat improved as all year-on-year (y/y) rates did better in January, it added.

In January, activity in the residential sector was weak. Both the KD volumes and number of transactions were down 39 per cent and 36 per cent y/y, said the country's top lender.  

A total of 250 sales contracts were registered at the Ministry of Justice in January, amounting to KD89.6 million ($299 million).

The government’s commitment to distribute 12,000 plots during this fiscal year coupled with the turmoil in oil markets may have discouraged some home-seekers from buying, it stated.

However, NBK said the real estate prices posted mixed results.

The residential-home price index stood at 178.3 points, 4.2 per cent lower than the previous year. The index has been in negative territory for the last six months, bottoming recently at -6.7 per cent y/y in November.

Since then, the index’s performance has shown slow but steady improvement. On the other hand, the residential-land price index was up by 2.6 per cent y/y rising to 185.7 points. The index went through a short and mild correction since December 2014 but appears to be stabilising since the second half of 2015.

A sharp rise in apartment sales boosted transactions in the investment sector in January, though overall KD sales were still down. Despite a 12 per cent y/y increase in transactions, which came from smaller ticket investment apartments, sector sales were off by 21 per cent y/y at KD 96.3 million ($322 million), it stated.

According to NBK, the rates of returns of investment properties have been pressured recently as the rental market appeared to ease in the last quarter of 2015.

Financial market and oil market developments also likely injected caution into the market. Prices in the investment building sector appeared steady in the past two months, it added.-TradeArabia News Service