Kuwait Finance House: 7.1% return on investment properties in the second quarter

Annual inflation in Kuwait registered 2.5 percent by the end of May 2026, according to the latest data from the Central Statistical Bureau. However, a slow acceleration has been observed since the beginning of the second half of 2025, after the rate had been on a downward trajectory, recording 2.2 percent in May 2025, amid varying increases in price levels. The rate of price increase in the housing services component declined, registering annual inflation of around 0.5 percent by the end of May 2026, down from 0.9 percent at the end of the fourth quarter of 2025.

According to a report issued by Kuwait Finance House, the accelerated completion of residential cities scheduled for implementation under government plans positively impacted real estate transactions in the second quarter, alongside the completion of numerous government and infrastructure projects, as well as the planning of new government initiatives. This occurred despite fluctuations in economic indicators amid geopolitical tensions. The general market index at the Kuwait Stock Exchange fell by 2.3 percent from the beginning of 2026 by the end of the second quarter, prompting some investors to shift toward safe-haven assets, including real estate. During the second quarter of 2026, gold prices rose, reaching $4,007 per ounce, marking a notable increase and a 21.3 percent year-on-year gain. However, this level remains the lowest since the beginning of the year, down 14.2 percent from the end of the first quarter of 2026, continuing to reflect the volatility and uncertainty characterizing the markets.

The report clarified that investment real estate offers competitive returns compared to other investment opportunities, with return rates ranging from 6.00 to 7.10 percent in the second quarter of 2026, depending on distinguishing factors across different governorates. It is worth noting that the return rate from sales does not include fines imposed in accordance with the regulations and laws enforced by the Kuwait Municipality, such as unauthorized basement rentals or the construction of residential units with areas smaller than the permitted limit. The average return on investment real estate in the Capital Governorate reached 6.48 percent by the end of the second quarter of 2026, while in Hawalli Governorate, the average return rate stood at 6.32 percent.

The report highlighted that the average return on investment real estate was 6.63 percent in Farwaniya Governorate, 6.82 percent in Ahmadi Governorate, 6.48 percent in Mubarak Al-Kabeer Governorate, and 6.67 percent in Al-Jahra Governorate by the end of the second quarter of 2026.

Kuwait Finance House’s report indicated that return rates ranged between 5.70 and 8.65 percent, based on second-quarter 2026 data across Kuwait’s governorates. The average return on commercial real estate in the Capital Governorate reached 6.85 percent by the end of the second quarter of 2026, while in Hawalli Governorate, it recorded 7.38 percent. In some locations within Hawalli, the average return reached 7.50 percent, and in Salmiya, it reached 7.33 percent.

The report noted that the average return on commercial real estate in Farwaniya Governorate reached 7.70 percent by the end of the second quarter of 2026. In some of its commercial areas, such as sites facing main streets in the governorate, the average return reached 7.60 percent. Sites in the Khaitan area showed a similar rate, while some internal locations in the Adaiji area reached 7.78 percent. Meanwhile, the average return in the Jleeb Al-Shuyoukh area reached 8.08 percent.

He noted that the average yield on commercial property in Al-Ahmadi Governorate reaches 7.82 percent, while the average yield on commercial properties in inland locations in Fahaheel reaches 7.83 percent, and in some key areas in Al-Fintas reaches 7.55 percent. In the Manqaf area, the average yield reaches 8.10 percent. The average yield on commercial properties in Al-Jahra Governorate stands at 6.94 percent, with the average in Marzouq Al-Mutab Street reaching 6.9 percent by the end of the second quarter of 2026. The average yield on commercial property in Al-Ahmadi Governorate is 7.82 percent, and the average yield on commercial properties in inland locations in Fahaheel is 7.83 percent, while in some key areas of Al-Fintas it is 7.55 percent. In the Manqaf area, the average yield reaches 8.10 percent. The average yield on commercial properties in Al-Jahra Governorate is 6.94 percent, with the average in Marzouq Al-Mutab Street reaching 6.9 percent by the end of the second quarter of 2026.