Dubai’s property market has consistently maintained its appeal as a highly sought-after investment destination for Kuwaiti investors, and transaction volumes look set to rise in the foreseeable future.
Over the course of the past two decades, Kuwaiti investors have recognised the immense growth opportunities offered by Dubai’s real estate sector, prompting them to make substantial investments – in fact by 2020 it was estimated USD 2.3 billion worth of Dubai real estate assets were already owned by Kuwait investors.
Now, the rate of Kuwaiti investment could increase further, following the divergent paths of the two Gulf states’ economic and property investment trajectories.
It has not been long since Kuwaiti property investors saw the volume of private housing transactions in their country fall 34% on an annual basis, but as we head into 2025, the market is not set for an immediate uptick.
Imad Haidar, the head of the Real Estate Brokers Association, recently highlighted the challenges facing Kuwait’s residential real estate market. He outlined the notable slowdown in demand that began at the start of last year and attributed this decline to several key factors, including rising interest rates on deposits, peak residential property prices, and the implementation of new regulations that have psychologically impacted market participants.
Decline in residential real estate market
Kuwait’s residential real estate market has experienced an average decline of 25% since the beginning of 2023. The most significant drops have occurred in more speculative outer locations. Investors have seen declines vary by region, with some areas experiencing reductions of 20%, while others saw decreases of up to 30%.
More stability found in Kuwait’s inner regions
In contrast, inner regions have remained more stable, with some locations even witnessing price increases due to a mismatch between high liquidity and declining demand.
Influence of bank interest rates
One notable trend has been the influence of bank interest rates on investment decisions in Kuwait. Capital tends to flow into real estate when rates hover between 2 and 2.5%. However, if rates exceed 3%, investors are more likely to favour savings – of course, global interest rates have risen for much of the past three years.
Future price expectations and legislative impact in Kuwait residential investment
Given the poor recent performance and the uncertain interest rate environment, the future of Kuwiat residential real estate remains uncertain. Furthermore, investors may seek more clarity on the potential impact of legislative changes, such as:
If laws are enacted concerning land monopolies or increased utility tariffs for secondary residences, there maybe a potential shift in investment focus from residential properties to other opportunities.
In stark contrast to the Kuwaiti uncertainty, Dubai has enjoyed a stellar few years of investment returns.
According to Dubai Land Department (DLD) statistics, the total sales value in Dubai’s real estate market reached AED 141.95 billion in Q3 2024, marking a remarkable 30% year-over-year increase. This robust performance was fueled by both off-plan and ready properties, showcasing the market’s versatility and broad appeal.
The market recorded an impressive 50,425 transactions, a 38% year-over-year increase, underscoring the high demand for Dubai real estate. The rental sector also saw significant activity, with 46,000 new rental contracts signed, highlighting the strong demand for residential properties.
Luxury properties continued to attract considerable interest, with prestigious areas like Dubai Hills Estate and Business Bay leading in sales and rental prices. Both main residential asset types – apartments and villas – experienced strong year-on-year capital appreciation, with apartments recording a 19% rise and villas seeing an even stronger 23% increase.
Furthermore, rental rates and subsequent rental returns also saw substantial growth. The average apartment rent rose by 19%, while villa rents increased by 13%. With only nine months of 2024 data available, the market has already witnessed a total residential transaction volume in excess of 125,000, representing a 36% increase compared to the same period in 2023. Much of 2024’s transactions have occurred in a buoyant off-plan sector, driven by a continuing demand-supply imbalance.
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Long tradition of investment volume
For years, Kuwaiti investors have been a major force in Dubai property. Back in 2011, it was revealed that 60% of all properties purchased by GCC nationals in Dubai, were Kuwaiti investments.
It prompted the senior vice president of DAMAC Properties Niall McLoughlin to say:
“Dubai is only an hour and a half flight from Kuwait, which makes it an ideal location for a second home, or even a primary home for some Kuwaitis. Dubai has always been popular with Kuwaiti investors, but given the price and the quality of properties now available on the market, Dubai offers phenomenal value for money.”
Increasing trade volumes and cooperation
According to data from the Federal Authority for Identity, Citizenship, Customs, and Port Security, the total trade exchange between the UAE and Kuwait reached AED 44.8 billion in 2023, up from AED 44.1 billion in 2022. This represents a 15% growth compared to 2021.
The UAE and Kuwait have several agreements and memoranda of understanding in place that aim to boost investment and trade between the two countries. The most recent of these agreements, signed by the finance ministries of both nations during the World Governments Summit 2024, addresses the avoidance of double taxation on income and capital, as well as the prevention of tax evasion and avoidance. These measures are part of broader efforts to achieve economic and financial integration and facilitate the free movement of capital between the UAE and Kuwait.
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