Kuwait Finance House: 7.1% returns on investment property in the second quarter

Slow pace of accelerating inflation in Kuwait in May

In its report on the local real estate market and inflation, Kuwait Finance House stated that annual inflation in Kuwait stood at 2.5% by the end of last May, 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 it had been on a downward trajectory, having recorded 2.2% in May 2025. Amid varying increases in price levels, the rate of price increases in the housing services component declined, recording annual inflation of around 0.5% by the end of May 2026, compared to 0.9% at the end of the fourth quarter of 2025.

He added that the accelerated completion of residential cities scheduled for implementation under government plans had a positive impact on real estate transactions in the second quarter. This was in addition to the completion of numerous government and infrastructure projects, alongside the planning of new government projects. Despite economic indicators experiencing volatility amid geopolitical tensions, with the general market index at the Kuwait Stock Exchange declining by 2.3% since the beginning of 2026 by the end of the second quarter, this reflected a shift by some investors toward safe-haven assets, including real estate. During the second quarter of 2026, gold prices rose to $4,007 per ounce, marking a notable increase of 21.3% on an annual basis. However, this remains the lowest level since the beginning of the year, down 14.2% from the end of the first quarter of 2026, still indicating the volatility and uncertainty prevailing in the markets.

Investment Returns

The report stated that investment real estate offers competitive returns compared to other investment opportunities, with return rates ranging from 6.00% to 7.10% 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 applied by the Kuwait Municipality, such as renting out basements or constructing residential units with areas smaller than the permitted limit. The average returns on investment properties in the Capital Governorate reached 6.48% by the end of the second quarter of 2026, while in Hawalli Governorate, the average return rate on investment real estate stood at 6.32%.

It was noted that the average return on investment properties in Farwaniya Governorate reached 6.63%. In Ahmadi Governorate, it was 6.82%, while in Mubarak Al-Kabeer Governorate, the average return reached 6.48%, and in Jahra Governorate, it recorded 6.67% by the end of the second quarter of 2026.

Commercial Returns

Kuwait Finance House’s report stated that annual return rates on commercial real estate range between 5.70% and 8.65%, according to second-quarter 2026 data across Kuwait’s governorates. The average return on commercial real estate in the Capital Governorate reached 6.85% by the end of the second quarter of 2026, while in Hawalli Governorate, it stood at 7.38%. The average return in some locations in the Hawalli area reached 7.50%, and in the Salmiya area, it reached 7.33%.

The average return on commercial real estate in Farwaniya Governorate reached 7.70% by the end of the second quarter of 2026. The average return in some of its commercial areas, such as sites overlooking main streets in the governorate, reached 7.60%, and in some sites in the Khaitan area, it was approximately the same. In some internal sites in the Dujeij area, it reached 7.78%, while the average return in the Ghabra area reached 8.08%.

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