With the outbreak of Covid19, the Governments in the GCC region, rightly so, introduced several lockdown measures. These tough measures adopted by the Governments will have considerable impact on real estate values. In such times when markets will be full of rumors, we bring some historical perspective.
During 2008 – 2009 period, the region saw severe impact of global financial crisis. While the origin of the financial crisis was totally different from the current Civid19 crisis, the market conditions are similar and therefore comparable.
Based on the comparison of thousands of transactions of houses between 2007 and 2013, we show in Chart 1 that the average prices of private houses decline by 1.6% in 2008 (over 2007) and further by 16.5% in 2009 (0ver 2008). In total the house prices declined by 17.9% before these started gradually improving. By 2011, the average house price was higher than the house prices in 2007.
Without doubt the price behavior varied a lot from location to location. Some locations posted decline of more than 30% also; however, the overall trend was as shown in Chart 1.
Chart 2 shows the comparison of transactions of residential investment properties across Kuwait. The average price increased somewhat in 2008 but declined sharply by 27.7% in 2009 (0ver 2008). Once again by 2011, the average investment property prices were higher than the prices in 2007 and 2008.
The real estate market is likely to react negatively to the economic shock of Covid19 and the property values will most likely decline. Many real estate market conditions are different in 2020 than these were in 2008. However, the two charts above put things in perspective as to how much decline can be expected and for how long the prices will remain low.
Estater (part of REMI) is the largest real estate intelligence platform in Kuwait and Bahrain. With wide raging database on properties across all sectors, Estater use sophisticated Geographical Information Systems and data science to map and predict real estate market behavior.Covid-19, Estater, House, Impact, Kuwait, Properties, Real Estate, Rentals