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Despite the challenges posed by the global geo-political uncertainty and a budding financial crisis in 2023, Kuwait’s real estate market has remained resilient. In fact, it continues to be a lucrative investment opportunity for both local and regional investors alike. However, as with any investment decision, it’s important to have a solid strategy in place. That’s where building a data-driven real estate investment strategy comes into play.

By leveraging market intelligence, investors can make informed decisions that increase their chances of success and minimize risk. In this blog post, we’ll explore how to build a successful real estate investment strategy in Kuwait using market intelligence, how to gather and analyze market data, identify investment opportunities, and develop a data-driven investment strategy with this guide.

Importance of Market Intelligence in building a Data-Driven Investment Strategy

Any effective data-driven investment strategy must include market intelligence. It aids in the trend identification, competitive analysis, and investment decision-making processes for investors. Market information can assist investors understand market trends and create plans to increase their profits. Market intelligence can be used to assess the state of the market, find prospective business opportunities, and assess potential risks. Investors can create a realistic picture of their investment portfolio and make wise decisions about where to put their money by comprehending the fundamental elements influencing market performance. Also, it can assist them in creating plans to optimize risks while seizing market possibilities.

Gathering Market Intelligence in Real-estate

Gathering market intelligence in real estate is more crucial than ever today. With the advancement of technology, it is now easier than ever to gain access to market data and make informed judgements. This information can be used to better understand real estate trends, uncover prospective investment possibilities, and assist purchasers in finding the best property for their needs. Market information is increasingly being used by real estate brokers to assist them make better decisions and provide better services to their clients. They can gain a better understanding of the market and how it affects their customers’ assets by analysing data from diverse sources such as public records, surveys, and analytics tools. Let’s divide this section into 3 categories:

1. Finding the sources of market intelligence in Kuwait real estate:

Finding reliable sources of market intelligence is essential for making informed decisions in the Kuwait real-estate market. Knowing the right sources of information can help investors and developers stay up to date on the latest trends, regulations, and opportunities in this rapidly changing market. To find the best sources of market intelligence, it is important to look at both public and private sources. Public sources include government websites, local newspapers, and industry reports. Private sources include real estate agents, brokers, and industry professionals who have access to insider knowledge about the Kuwait real-estate market.

2. Key factors to analyse the market:

When studying the Kuwait real-estate market, several major elements must be considered. Economic conditions, population studies, government regulations, infrastructural development and availability of capital, etc.. Many of these factors influence the market for real estate in Kuwait and can assist investors in making sound investment selections. By carefully comprehending and analysing these critical aspects, investors can acquire insights into the current health of the Kuwait real-estate market and prepare accordingly for future investments.

3. Analysing of demographic and economic trends:

Many demographic and economic variables influence demand and supply dynamics in Kuwait’s real estate market. Kuwait’s population growth has been a major source of demand for housing and commercial spaces, resulting in an increase in property prices. Development of new cities such as Mutla, South Sabah AL Ahmad, Nuwaiseeb, etc. offer scores of new investment opportunities. Furthermore, expatriates make up a sizable section of Kuwait’s population, that opens up several opportunities in Investment Areas.

Determining the Investment Opportunities

While investing in Kuwait real estate, various considerations must be considered. They include the location of the property, the supply and demand equation, possible rental returns and capital appreciation, the legal and regulatory environment, and so on. Let’s see how to determine investment opportunities in Kuwait’s real estate market:

  1. Identifying the potential investment areas in Kuwait:

For investors wishing to diversify their portfolios, Kuwait’s real estate industry is an appealing investment possibility. With a burgeoning population and a thriving economy, the country provides a diverse range of prospective investment opportunities. There are numerous chances for investors to profit from, ranging from residential properties to commercial buildings. Before making any decisions, investors should evaluate the current market trends. While analysing potential investments, consider factors such as population growth, economic stability, and government laws. Furthermore, investors should examine the dangers connected with investing in Kuwait’s real estate market, such as political uncertainty and rising interest rates in 2023. Investors can make informed decisions about where to invest their money to optimise returns by considering these aspects. We have detailed this in one of our blogpost.

2. Evaluating investment opportunities using market intelligence:

The Kuwait real estate market presents several investment opportunities that can be evaluated using market intelligence. Gathering and analysing data from numerous sources to get insights into industry trends, demand and supply dynamics, and price patterns is what market intelligence entails. This information can be used by investors to estimate the possible risks and rewards of investing in the Kuwait real estate market. Population increases, economic development, and government regulations can all have an impact on market performance. Investors can find the most attractive investment possibilities by examining existing and future demand for real estate. Furthermore, market intelligence can assist investors in making educated selections about the types of properties to invest in, such as residential, commercial, or industrial properties. Estater’s MI platform delivers the most updated reports, data visualisations, data tables, catchment and demographic analyses, and benchmarking studies suited to your target investment.

Building a strong Data-Driven Strategy for Investments

Developing a strong data-driven strategy for real estate investments necessitates a systematic approach that includes defining investment objectives, gathering and analysing relevant data, developing investment hypotheses, testing these hypotheses, developing an investment strategy, and monitoring and refining the strategy over time. Following these stages allows investors to make informed decisions based on market trends and patterns, find opportunities for long-term capital appreciation or regular income streams, and efficiently manage risk. A data-driven strategy can assist investors in navigating difficult market conditions, identifying emerging trends and opportunities, and making more informed decisions that are in line with their investment goals.

1. Developing a real estate investment strategy based on market intelligence:

Creating a real estate investment strategy based on market intelligence is critical for real estate success. It entails acquiring and analysing data on numerous real estate market elements such as supply and demand, demographics, catchment study, economic trends, and local legislation. An investor can use this information to uncover possible possibilities and make informed judgements about where to put their money. Market information, for example, might assist an investor in identifying neighbourhoods that are undergoing expansion and have a strong demand for rental properties. Using this information, an investor can devise a plan for acquiring and managing properties in these areas.

Estater Meter will keep you up to date on economic, expansion, demographic, and developmental changes in your target neighbourhoods, as well as provide instant estimates on target properties. Our market intelligence solution MI on the other hand will provide you with the most recent reports, data charts, data tables, catchment and demographic analytics, and benchmarking studies tailored to your target investment.

2. Setting real estate investment goals and objectives:

Establishing real estate investment goals and objectives is a vital element in developing a successful investment strategy. Objectives should be specific, measurable, achievable, relevant, and time-bound (SMART). Investment goals could include generating a specified level of cash flow, achieving a specific return on investment, or acquiring a certain number of properties within a specific timeline. Goals, on the other hand, are the exact steps that an investor takes to achieve their goals. Doing market research, evaluating prospective investment opportunities, examining financial data, and negotiating with sellers are all examples of objectives.

Estater assists you in achieving your investment objectives by using scientific and super flexible financial models. We can match your investment strategies and provide you with consulting services.

3. Developing a real estate investment risk management plan:

Creating a risk management strategy is an essential component of investing in the real estate market. The plan should identify potential hazards and provide mitigation actions. Market fluctuations, property damage or loss, tenant default, and changes in zoning rules or regulations are all common risks in real estate investing. To mitigate these risks, investors can diversify their portfolio, undertake comprehensive due diligence before purchasing a property, seek insurance coverage, and keep enough financial reserves. Also, investors should watch and analyse market developments on a regular basis and alter their approach as needed to keep ahead of potential threats. Investors can reduce their exposure to potential losses and assure the long-term success of their investments by implementing a well-thought-out risk management plan.

How Estater helps for the real estate Investments in Kuwait?

Estater consultancy and advisory services provides detailed and comprehensive reports on different real estate sector in Kuwait that can provide intricate details in these trends related to:

  1. Market insights: Inventory build-up and occupancy trends.
  2. Location analysis: Market gaps and catchment analysis.
  3. Competitor Benchmarking: Estater can help businesses understand their competition and make strategic decisions.
  4. Financial Modelling: Estater can provide you highly flexible financial model which can be easily modified based on your inputs.
  5. Leasing Trends: Lease rate and tenant mix analysis.
  6. Demographic analysis: Combining sectoral data with demographics of the areas, Estater can help businesses understand their target audience.
  7. Consultancy: We offer consulting services for many aspects of real estate reports, such as financial modelling, benchmarking, demographic analysis, catchment analysis, and so on. Our Estater Meter and Market Intelligence solutions will provide you with customised results depending on your preferences.

Real estate investment is one of the most traditional and prominent investments in the world. The real estate market is constantly changing and adapting to new technologies and economic trends. Various market disruptions in the past have now led to a more research backed approach in real estate. Artificial Intelligence (AI) has eased the process of real estate investment, in ways that were unimaginable a few decades ago.  Technological developments like AI market research, automated property recommendations and automated valuation models etc. are leading to a transformation in the real estate industry. In this blog, we’ll explore the impact of AI on real estate investment.

What is AI?

Before diving into the impact of AI on real estate investment, it’s essential to understand what AI is. AI is a technology that involves the development of intelligent machines that can perform tasks that would typically require human intelligence. These tasks include things like decision-making, problem-solving, and natural language processing.

Artificial Intelligence (AI) is revolutionizing various industries across the globe, and real estate is no exception. With AI, real estate investors can make data-driven decisions, automate tasks, and gain insights that were previously not possible. Here’s a closer look at how AI is impacting real estate investment:

How will AI lead to Improved Decision-making in real estate investment?

Real estate investment involves analyzing large amounts of data to make better decisions. AI algorithms can analyze data quickly, accurately, and in real-time. This enables investors to make decisions based on market trends, property value, and other key factors. With AI-powered decision-making, investors can identify opportunities and make informed choices to maximize their returns. This will lead to a reduction in decision making timelines.

For example, let’s say a company has an empty land area in the city of Jeddah and it is thinking of building an amusement park. With the help of AI, collecting and analyzing population data (age groups, families income rates and children number), and competition benchmarking of similar amusement projects might be done within a very fast time and at a fraction of the cost (compared to traditional feasibilities that take several months and may cost a lot).

How AI can help in Predictive Analytics in Real Estate?

AI can predict trends in real estate, enabling investors to make proactive decisions. With predictive analytics, investors can set their objectives, anticipate market trends, identify potential risks, and adjust their investment strategies accordingly. AI-powered predictive analytics can assist investors to spot market opportunities before others and optimize risk in their portfolio.

For example, AI collecting property’s location, size, age, and condition, as well as recent sales data for similar properties in the area would help the predictive model suggest how property values are likely to change in a certain area. Investors might choose to buy a property in that area in order to take advantage of potential future gains. Alternatively, if the model predicts a decline in property values, an investor might choose to sell a property in that area in order to avoid potential losses.

Smarter Property Valuation with AI

AI-powered tools such as automated valuation models (AVMs) use machine learning algorithms to evaluate a property’s value based on various hundreds of factors such as location, size, age, and other characteristics. This enables real estate investors to get accurate and reliable property valuations and make better investment decisions.

For example, an AI tool like ( Estater Meter) can analyze a vast amount of data, such as historical property prices, recent sales data, and demographic information, to provide a more accurate estimate of the property’s value.

The AI-powered valuation tool can factor in various features of the property and its surrounding location that may impact its value, such as proximity to schools, shopping centers, public transportation, and crime rates. By analyzing these factors, the AI tool can provide a more comprehensive and accurate valuation of the property.

Enhanced Customer Experience with AI in Real estate 

 AI-powered virtual assistants can provide real-time customer support and help investors address their queries and concerns promptly. This can improve the customer experience, increase customer satisfaction, and build stronger relationships with investors.
For example, a large real estate company with hundreds of clients would use an AI virtual assistant loaded with lots of answers and suggestions to help customers.

Can AI provide Personalized Investment Recommendations?

AI can provide personalized investment recommendations based on an investor’s financial goals, risk tolerance, and investment history, making it easier for investors to find properties as per his requirements. AI will reduce the efforts that need to be put in to find a suitable property or location.

For example, Mohamed wants to invest in real estate. AI algorithms can analyze Mohamed’s investment preferences based on his past income, the type of properties he has shown interest in, his online search history and his risk tolerance level. The AI can then recommend properties that align with Mohamed’s investment preferences.

How AI Detects Fraud?

AI algorithms can also detect fraudulent activity, such as fake property listings or false claims by potential tenants. Ruling out fraud or duplicate listings would be easier with the help of predefined algorithms. This can reduce the risk of deception for real estate investors.
For example, AI can use Natural Language Processing (NLP) techniques to analyze text data, such as emails.
For example, AI can identify certain keywords or phrases that are commonly used in fraudulent messages, such as “urgent” or “act now.” Or use Behavioral Analysis if a user suddenly logs in from a different location or device, the AI may flag this as potential fraudulent behavior.

Corona Crisis has led to 18.3% decline in Bahrain Retail space sector in the year 2020. This decline is the combined effect of two factors – reduction in the space occupancy and drop-in average lease rates.

Chart below shows that between 2019 and 2020, the retail space inventory remained almost the same (marginal reduction due to some malls temporarily closing some areas). However, the occupancy ratio dropped from 89.5% in 2019 to 80.7% in 2020.

Further, the overall average lease rate has dropped from BD 9.02 per m2 per month in 2019 to BD 8.19 per m2 per month. This led to sharply lower rental income of the retail properties in 2020.

The chart below shows that the annual rental income in 2019 was estimated at BD 91.1 million that has dropped to BD 74.5 million in 2020 – a sharp decline on 18.3%.

Some of the loss of income maybe temporary as the properties might find replacement tenants in a few months. However, we caution that the decline is severe, and it is continuing. With no visitors from Saudi Arabia, the retailers are finding it difficult to sustain their businesses. The spread of e-commerce is making things more difficult.

We see the rough patch continuing for the retail sector in 2021.

Estater (part of REMI) is the largest real estate intelligence platform in Kuwait and Bahrain. With wide raging database on properties across all sectors, Estater use sophisticated Geographical Information Systems and data science to map and predict real estate market behavior

Estater continues its analysis on the retail sector in this blog, this time we cover Bahrain retail sector.

Estater estimates that Bahrain by the end of 2019 has around 2.05 million m2 of retail space spread across hundreds of properties. Of this, around 45% is in main retail malls such as City Center, Seef Mall, The Avenues Bahrain, The Atrium Mall, Juffair Mall, Oasis Malls, etc. The remaining 55% includes all the plazas, high street retail and stores across the country. The occupancy ratio for this entire space is around 85% with average lease rate estimated around BD 7.1 per m2 per month.

As the theory of retailing shows, a retailer pays anywhere between 7% to 20% of its gross sales as rental to sustain its business. The percentage varies mostly within this range across different cities in the world, different properties and for different shops within each property.

Bahrain Government carries out household expenditure survey from time to time. The last such survey was done in 2014 / 15. The monthly expenditure and its breakup for Bahraini and non-Bahraini households is shown in the table below.

Table 1: Monthly expenditure breakup for Bahraini and non-Bahraini households

Using suitable growth rates in line with economic growth between 2014 and 2019, the chart below shows our estimates of monthly household expenditure in 2019. Average monthly expenditure by a Bahraini household was BD 1,975 in 2019 and BD 1,198 by a non-Bahraini household.

Monthly Expenditure

Not all this expenditure is done in retail properties; spending on health, education maintenance of houses, etc. is all outside retail properties. Using suitable matrix, we have estimated the monthly spending of Bahraini and non-Bahraini households in retail properties. This is shown in the chart below.

Monthly Household Spending in retail Properties

Based on our estimates for different spending items, we have projected decline in household retail spending for the year 2020 and 2021. We have accounted for 15% decline in 2020 and another 5% in 2021. Note that most of the retail properties (barring the essential items) were closed for several weeks due to lockdown; this alone can lead to around 8-10% decline in the year 2020. Therefore, 15% decline over the full year due to economic difficulties is very much possible.

In 2019, we estimate that there were 125,000 Bahraini households and 245,000 non-Bahraini households (as per population data and average family sizes). Multiplying their respective monthly retail spending, we get BD 2.59 billion as annual spending in Bahrain in all retail properties.

With total 2.05 million m2 retail area with average lease rate of BD 7.1 per m2 per month, the retail properties receive BD 175 million as rental payments every year. This represents 6.8% of the retail spending.

Table 2: Estimates of Household Spending in Retail Properties Bahrain (2019)

The ratio of rentals as percentage of retail spending is the lowest in Bahrain for GCC countries. In other words, the retail lease rates are the lowest in Bahrain for all GCC countries.

The retail space will undergo some expansion over the next two years as several properties are already under construction (such as Kingdom Mall, Mall of Dilmunia, Marassi Mall, etc.). Over this time period, number of households will also increase due to their natural growth.

We believe that the ratio of rentals to retail spend will decline over the next two years as the retailers will not be willing to pay the same rental levels as before. We project (refer to the chart below), the ratio will decline from 6.8% in 2019 to 6.5% in 2020 and further to 6.3% in 2021.

Projected Trend for Retail Space and Rentals as % of Retail Spending

Keeping in mind all factors such as decline in the rental to retail spend ratio, increase in households, decline in retail spending, we have projected that the rental income of all properties in Bahrain is expected to decline to BD 138 million in 2020 (from BD 175 million in 2019) and further to BD 129 million in 2021. This decline could be the combined effect of higher vacancy and lower lease rates.

We also project that the average lease rate will fall to BD 6.7 per m2 in 2020 and to BD 6.5 per m2 in 2021. This is 5.5% decline in the average lease rate in 2020 and another 3.0% decline in 2021.

Projected Trend for Rentals and Average Lease Rate (per m2)

The rate of decline will vary considerably across locations and across property types. However, suffice to say that the retail space sector is looking at around 8 – 9% decline in average lease rates over the next 12 – 18 months. The decline in lease rates elsewhere in GCC are far higher (around 25 – 30%) but Bahrain is expected to have moderate decline as the lease rates here are already low.

The drop in the lease rentals will lead to substantial decline in retail property valuations. In the first year itself, the combined effect of drop in income and increasing risk premium in the market can lead of substantial devaluation in retail properties. This will present a challenge to the banking sector as many of the retail properties are mortgaged.

Estater (part of REMI) is the largest real estate intelligence platform in Kuwait and Bahrain. With wide raging database on properties across all sectors, Estater use sophisticated Geographical Information Systems (GIS) and data science to map and predict real estate market behavior.