Markaz’s real estate reports predict robust sector growth in key GCC markets for H1 2024

In line with its commitment to empowering investors with the latest and most reliable information on market trends and opportunities, Kuwait Financial Centre “Markaz” published a series of reports on the real estate markets in Kuwait, Saudi Arabia, and the UAE recently. 

Prepared by Marmore MENA Intelligence, of the research arm of Markaz, the reports review the real estate sector’s performance for H2 2023 and provide a detailed outlook report of H1 2024 based on critical macroeconomic indicators like oil and non-oil GDP growth, fiscal position, investments, money supply, inflation, interest rate, population growth, and job creation.

According to the projections for H1 2024, the real estate sector in the GCC region is expected to witness steady to accelerated growth trends, powered by anticipated stability in oil prices, rise in real estate demand, strong economic growth, and supportive government policies. The Markaz Real Estate Macro Index Scores for Kuwait, UAE, and Saudi Arabia for H1 2024 are 2.9, 3.8, and 3.55, compared to the H2 2023 scores of 2.8, 3.8, and 3.55, respectively.

Kuwait Real Estate Report

The Markaz Real Estate Report for Kuwait forecasts a stable real estate market in the country in H1 2024, buoyed by several favorable factors. The country’s economic growth is expected to be positive at 3.6% year-on-year, compared to -0.6% in 2023, supported mainly by the projected non-oil sector growth rate of 3.5% supported by an expected stabilization of interest rates and the recent boost in project activity. Also of significant impact are the IMF forecasts of oil prices, set to average at USD 79.92 per barrel in 2024 compared to USD 80.49 per barrel last year, ensuring stability in prices, as well as Kuwait’s decision to continue its voluntary oil output reduction.

Kuwait witnessed relatively stable inflation (CPI) trends during H2 2023 enabled by the country’s easing of food prices as well as the decline in global food prices. During the same period, housing rents increased by 3.4% year-on-year while the credit to the private sector underwent a significant slowdown from 9.1% to 2.5% year-on-year in October 2023. The report states that the likelihood of the peaking of interest rates, the continued momentum in project activity, and the ongoing job gains for citizens could support credit growth through H1 2024, although elevated interest rates and extension of oil production cuts to end-2024 could cap credit growth.

The report notes that the real estate sector remained largely stable in 2023, with prices and rent holding steady and the normalization of the pent-up post-pandemic demand beginning to normalize. It also highlights the decline in residential sales, transaction volumes, Istithmari segment, and commercial sector sales in 9M 2023. However, based on its assessment of various macroeconomic indicators, the report reflects confidence in the stability of the Kuwaiti real estate sector in 2024. The outlook suggests promising prospects for increased activity in the latter part of the year, as evidenced by the country’s Markaz Real Estate Macro Index score of 2.9 out of 5.0.

KSA Real Estate Report

Markaz’s KSA Real Estate Report estimates improved economic growth for the Kingdom in 2024 as opposed to the slow growth experienced in 2023. This is primarily expected to be driven by Saudi Arabia’s robust performances across the oil and non-oil sectors, with real GDP growth expected to improve by 4% year-on-year. The Kingdom’s economic performance is expected to improve due to the stronger demand for oil, moderate inflation levels, and low unemployment levels. The contribution of non-oil activities, along with active government spending, is expected to further accelerate the performance.

Saudi Arabia’s oil prices are expected to average at USD 93 per barrel in 2024, according to IEA’s estimates, as opposed to the IMF forecasted breakeven price of USD 79.7 per barrel. The Kingdom’s fiscal position is anticipated to be secured by ongoing government investments and the stability of oil prices. 

According to the report, the value of Saudi Arabia’s real estate transactions decreased by 11.3% year-on-year until September 2023, with a corresponding volume drop of 7%. Driven by a 1.2% increase in residential land prices, the KSA real estate price index rose by 0.7% year-on-year in Q3 2023, although residential transactions continued to decline due to higher interest rates on mortgages and rigid property prices. However, the strong performance of the office sector witnessed during 2023 is expected to continue into 2024, especially due to the demand driven by multinational companies looking to set up their regional headquarters.

The report predicts an accelerated phase for the real estate sector in Saudi Arabia in H1 2024 based on its assessment of the various macroeconomic factors in the Kingdom. The sector’s favorable position is expected to be supported by a stable growth in non-oil activities, a robust hospitality sector, and increased government spending on infrastructure projects.

UAE Real Estate Report

Markaz’s Real Estate Report for the United Arab Emirates predicts sustained growth for the country’s economy in 2024, with real GDP growth of 4% year-on-year as compared to 3.4% in 2023, which is backed by IMP projections. This growth is expected to be primarily driven by the country’s higher oil GDP, non-oil sector growth, investor-friendly government policies, stable fiscal position, and current account surplus.

The report anticipates that inflation in the UAE will average 2.3% in 2024, a projection in line with the estimates provided by the IMF. This expectation is reinforced by the moderation of price levels across significant segments, along with the presence of high rates of interest. It adds that higher interest rates in H1 2024 are likely to impact consumer spending and demand for mortgages.

According to the report, the UAE economy is expected to grow at a steady pace, supported by the increasing oil output and the expanding non-oil sector, despite fears of a mild recession in the USA and the Euro Zone, alongside the high global inflation levels anticipated in 2024. The real estate sector in the country witnessed strong growth in Q3 2023 with a continued surge despite macroeconomic headwinds, which is expected to continue in H1 2024 due to the ongoing high growth of key real estate segments like residential, office, and hospitality as well as the rising demand from ultra-high net worth individuals and the limited projects in the pipeline. Furthermore, the country’s flexible visa policies, as well as its business-supportive and investor-friendly policies and tax laws, could drive real estate demand further.

The report expects the UAE’s real estate demand to accelerate in the first half of 2024, though at a slower pace compared to 2023.

About Kuwait Financial Centre “Markaz”

Established in 1974, Kuwait Financial Centre K.P.S.C “Markaz” is one of the leading asset management and investment banking institutions in the MENA region with total assets under management of over KD 1.16 billion as of 30 September 2023 (USD 3.75 billion). Markaz was listed on the Boursa Kuwait in 1997. Over the years, Markaz has pioneered innovation through the creation of new investment channels. These channels enjoy unique characteristics and helped Markaz widen investors’ horizons. Examples include Mumtaz (the first domestic mutual fund), MREF (the first real estate investment fund in Kuwait), Forsa Financial Fund (the first and only options market maker in the GCC since 2005), and the GCC Momentum Fund (the first passive fund of its kind in Kuwait and across GCC that follows the momentum methodology), all conceptualized, established, and managed by Markaz.