Boston, MA -- (SBWIRE) -- 12/20/2013 -- We believe that the real estate sector in Kuwait will increase in some sectors and remain stable in others due to a reduction of oversupply in the office and retail subsectors. However, without a significant change in the supply and demand dynamic, we predict that there will be no change to net yields in 2014 for all subsectors.

Kuwait's commercial real estate sectors are developing in different directions and at varying rates. Overall market sentiment remains positive and signs generally point towards a recovery after several difficult years. The most recent data and market news corroborates our expectations that the market is stabilising and increasing in some subsectors. The sector continues to be characterised by frequent, although ultimately minor, fluctuations in rental rates.

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While BMI is generally optimistic about Kuwait, there are several pitfalls to the current scenario. One significant one is if soft market conditions persist - particularly in the office segment where dynamics are still dictated by a legacy of oversupply. Our outlook would also be considerably tempered should political uncertainty in the country or its neighbours escalate.

Future evolutions in Kuwait's political sphere will continue to present substantial risks to our growth forecasts. The Kuwaiti economy will remain on a moderate expansion path heading into 2014, with growth supported by robust private consumption and a modest rise in oil production and exports. We forecast real GDP growth of 3.0% for 2013, slowing slightly to 2.6% in 2014. We remain cautious about Kuwait's fixed investment outlook, and note that political evolutions will continue to present both upside and downside risks to our growth forecasts.

Government stimulus measures continue apace but growth remains dampened as project delays and claims of corruption impede development. Low growth is expected throughout the forecast period to 2022, with the highest rate being at 3.3% y-o-y in 2013.

Recent Developments

- The National Bank of Kuwait has announced that the accumulated value of real estate transactions in the country in June rose 27% year-on-year (y-o-y) to KWD339 (US$1.18bn).
- Kuwait-based United Real Estate Company has sold 10 of its plots in the Mubarakiya area in Kuwait and two plots in Entertainment City, Qatar. The company made the sales for US$46.7mn, making a combined net profit of US$9.7mn. The 10 Mubarakiya plots cover an approximate total area of 1,295sq m, representing 1% of United's total assets with a book value of US$16.3mn, giving the company a net profit of US$3.1mn. The sale of the Entertainment City plots generated around US$6.6mn.

Key BMI Forecatsts:

- Rental rates will increase by 5-10% in the Kuwait City office subsector, and by 5% in the Al-Jahara office subsector.

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