Economic Insight
20.10.2025
Real estate sales surged to an 11-year high in Q3, led by record-high commercial transactions, though growth in residential and investment segments slowed. Overall sales in Q3 were well above the five-year average for this traditionally softer quarter, with a noticeable shift toward outer urban areas, especially in investment and commercial segments, indicating growing interest in rental and income-generating assets. Residential sales, on the other hand, are rising more slowly, weighed down by affordability and supply constraints. Meanwhile, real estate price rises softened in Q3 due to a sharper drop in residential prices and slower growth in investment unit prices, though price trends are still more upbeat than a year ago. Looking ahead, we expect a broadly positive overall market performance to be sustained, supported by the potential approval of the real estate financing law and the prospect of lower interest rates.
Overall property sales reached KD1.2 billion in Q3, marking a second consecutive quarter of strong quarter-on-quarter growth (+24%), while yearly growth (+47% y/y) reached its fastest in four years. (Chart 1). The commercial segment, despite its historical volatility, saw record-breaking sales of KD441 million, due to large-scale land transactions in Al-Ahmadi governorate (KD240m in August alone). Stripping out commercial activity would see sales growth (residential and investment) in Q3 ease from a four-year high of 61% y/y to 14.5%. Investment sales remained resilient at KD407 million and supported by strong bank lending to the real estate sector (+7% y/y in July and August) and the recent changes to investment housing and foreign ownership regulations. (Chart 2.) However, investment sales growth moderated to a still-high 28% y/y from Q2’s more exceptional level of 116%.
Residential sales came in at KD396 million in Q3, down 5.3% q/q but up 3.2% y/y. This modest annual increase in sales comes despite a marked increase in the number of transactions (+15.6% y/y) and this can be explained by the fact that sales have increasingly been concentrated further out in lower-priced areas such as the Al-Ahmadi and Al-Jahra governorates.
Real estate price rises slowed in Q3 amid residential weakness
Meanwhile, real estate prices in Q3 rose at a slower 1.4% y/y compared to 2.9% in the previous quarter, according to our real estate price index. (Chart 3.) This deceleration was primarily a reflection of a larger contraction in residential prices (-1.8% y/y) and a more moderate increase (+5.3% y/y) in investment (i.e. apartments and buildings) prices. Although the pace of residential price declines has moderated since the beginning of the year, the figures suggest that downward pressures persist, albeit less intensely. One possible contributor is the potential release of idle land due to the vacant residential lands law coming into effect in January 2026. However, the anticipated approval of the housing financing law and the prospect of lower interest rates may support prices in the months ahead.
PAHW advances housing agenda with strategic developer partnerships
Kuwait’s Public Authority for Housing Welfare (PAHW) has recently launched a strategic roadmap to engage real estate developers for a foray into public-private housing development projects. The initial phase targets three key areas: Mutlaa (2,500 units), East Saad Al-Abdullah (1,200 units), and a combined development in Jaber Al-Ahmad and West Saad Al-Abdullah (1,000 units). The aim of this initiative is to address the housing shortage (outstanding applications for the government housing scheme reached 103,110 by mid-July) and accelerate delivery. In parallel, PAHW signed an investment agreement in July for a 12,575 sqm mixed-use project in Al-Qairawan while reporting notable progress across major infrastructure projects in South Saad Al-Abdullah and South Sabah Al-Ahmad cities with several contracts signed ahead of schedule. Overall housing project awards slowed down in Q3, however, as reported by MEED Projects, dropping to KD20 million from KD100 million in Q2 2025. (Chart 4.) Meanwhile, the value of housing loans approved by the Kuwait Credit Bank for government plots increased for the second straight quarter in Q3 (+28% q/q to KD61 million), a positive turnaround since Q1 when loan approvals were at a four-year low. The value of disbursed loans, however, declined by 14% q/q to KD82 million.