Markaz’s H1-2023 real estate reports signal sector growth in key GCC markets



The Kuwait Financial Centre “Markaz” launched a series of reports on the real estate sector in Kuwait, Saudi Arabia and the UAE. The reports stem from Markaz's commitment to keeping its clients and those interested in the sector, informed and up to date on the latest developments. 

Buoyed by strong macroeconomic fundamentals, the real estate sector in GCC economies is on a solid trajectory to witness acceleration in the first half of the year, according to the ‘Real Estate H1 2023 Outlook’ reports for Kuwait, Saudi Arabia and the UAE, issued recently by the Kuwait Financial Centre “Markaz”. 
Prepared by Marmore MENA Intelligence, the research arm of Markaz, and based on the ‘Markaz Real Estate Macro Index’, which is designed to help investors in identifying the current state of real estate market using a list of economic indicators. For each of the qualitative score, a quantitative score was assigned with ‘Strong’ being assigned a top score of ‘5’ and ‘Poor’ assigned a value of ‘1’. A weighted average score is computed based on the Macro-Economic factors. Markaz’s annual real estate reports cover macroeconomic and microeconomic activity and provide data-driven insights and figures that measure the status of the industry across key GCC markets into 2023. 

Markaz’s Real Estate Report 2023 Outlook’s assessment of the real estate market in Kuwait stated that it would moderately accelerate in H1 2023 as indicated by ‘Markaz Real Estate Macro Index’ score of 3.6 out of 5.0, while Saudi Arabia will reach a score of 3.5, and the UAE is expected to score 3.7.

Kuwait Real Estate Report
Markaz’s Kuwait Real Estate Report 2023 Outlook stated that Kuwait’s real oil GDP growth rate is expected to be 2.0% in 2023, lower than 12.4% in 2022 owing to production cuts mandated by OPEC+ and expected decline in demand for oil on fears of a global recession. Non-oil economic activity is expected to grow at 3.4% in 2023. 

The report also highlights that with global supply chain disruptions easing, Kuwait’s inflation has begun to slow down. Consumer Price Index (CPI) rate was 3.27% as of October 2022 in comparison with 4.71% in April 2022. Food and beverage, an important component of inflation due to Kuwait’s high reliability on imports has softened to 6.63 % as of October 2022 compared to the highs of 9.13% in April. The report also stated that overall credit growth has increased to 11.7% in Q3 2022 on y/y basis as compared to 4% in Q3 2021 on y/y basis. However, rise in interest rates and global recessionary pressures could be a headwind for the lending sector. 

Moreover, sales in the Real Estate Sector were stable in Q3 2022 supported by commercial and investment sectors compensating the decline in the private housing segment. Commercial sector sales were at KD 124mn (+241.6% y/y) and investment sector was at KD 253mn (+7.2% y/y). Residential sector registered sales of KD 443mn (-46.4% y/y). 

The conclusion of the report stated that based on Markaz’s assessment of various macroeconomic indicators, the company believes that the Real Estate market in Kuwait will moderately accelerate in H1 2023 as indicated by Markaz Real Estate Macro Index score of 3.6 out of 5.0.

Saudi Arabia Real Estate Report
Markaz’s Saudi Arabia Real Estate Report 2023 Outlook stated that Saudi Arabia’s economic growth momentum is expected to slow down in 2023 compared to 2022, amid expected softening in oil prices and lower production in line with OPEC+ cuts. In Q3 2022, Saudi Arabia registered real GDP growth of 8.6% y/y, mainly supported by rise in oil production. Non-oil economic activity is showing growth and is expected to be positive in 2023. 

Furthermore, oil prices are expected to average below USD 100/bbl. in 2023 amid sober global economic outlook. According to preliminary budget, the government has increased spending and expects to post a surplus. The country has also reported a budget surplus of SAR 149.6 billion (USD 40 billion) in the first nine months of 2022. 

The report also stated that the value of real estate transactions in Saudi Arabia from January-September 2022 had been SAR 172.5bn, marking an increase of 12.2% y/y. The KSA real estate price index, covering price movements across residential, commercial and agricultural segments rose by 1.5% in Q3 2022, mainly driven by a 2.6% y/y increase in residential land prices. Real estate prices, as indicated by the price index, have been relatively stable in the recent past, showing mild growth. 

Markaz’s report also showed that the Saudi Arabian real estate market has been broadly positive, supported by favorable economic conditions and government initiatives. However; rising interest, sober global economic outlook poses some headwinds. 

Based on Markaz’s assessment of various macroeconomic factors, it believes that the real estate sector in Saudi Arabia is expected to continue its recovery with a moderate chance of acceleration in 2023.

United Arab Emirates Real Estate Report
Markaz’s United Arab Emirates Real Estate Report 2023 Outlook reported that the UAE economy is anticipated to witness robust growth in 2023 and record a GDP growth of 4.2% over the same period as projected by IMF. The growth would be supported by steady oil prices, strong performance in the non-oil sector and progressive regulations promoting foreign investor participation. 

The report also indicated that the real estate sector in the UAE has had a positive year in 2022, witnessing a rise in rentals and property prices. From the start of the year, 2022, to September 2022, average property prices and rents increased by 8.9% and 26.6% respectively in Dubai. Transaction value in the first nine months of 2022 in Dubai touched record high levels and has already surpassed the volume witnessed in full year 2021.
Transaction value has been the highest recorded since 2013, when market hit the peak. Value of transactions touched AED 70 billion in Q3 2022, marking a growth of 64.5% on year-on-year basis. Government reforms and regulations in addition to hosting major global events have played a vital role in the rebound. 

Despite weakening global macroeconomic environment, Markaz’s report stated that the UAE is relatively on a stronger footing, supported by strong oil prices and supportive measures to develop the non-oil economy. The successful hosting of the Dubai Expo and the continued interest from International Real Estate investors in Dubai are expected to underpin growth in UAE Real Estate sector in the coming year. Though the demand for office and residential real estate might be impacted by rising interest rates, higher mortgage rates could support rental demand. Measures targeted towards improving transparency and reporting within the real estate sector to increase efficiency and enhance compliance are set to boost investor confidence further. 

Overall, and based on Markaz’s assessment of various macroeconomic factors, it believes that the real estate sector in UAE is expected to accelerate in the first half of 2023.

Kuwait Real Estate Report
Saudi Arabia Real Estate Report
United Arab Emirates Real Estate Report