FROM URBAN SPRAWL TO URBAN CRAWL

Kuwait 2018 | CONSTRUCTION & REAL ESTATE | FOCUS: LAND ACCESSIBILITY

Limited land and high development costs are limiting Kuwait's economic development, but new measures to better integrate transport and real estate expansion provide a little more wiggle room.

Land development in most of the Gulf has always come cheap thanks to the abundance of low-value, unused land around the cities. Most cities have a virtually never-ending desert to sprawl; but, Kuwait's geography leaves little room for Kuwait City's expansion. As the Kuwait City urban area grows and the traffic problems worsen, land prices in the center of the city have skyrocketed due to demographic growth and increased economic activity—likely to accelerate and further create issues of land accessibility. On average, land value accounts for an average of 20-30% of development costs in the construction sector in the broader GCC; in Kuwait City, this figure reaches 50-60%. The exploding price of land causes many problems for Kuwait, most notably a housing shortage. In the past, limited land space was overcome through suburban horizontal expansion, somewhat controlling land costs in the short term and creating dire traffic and transport infrastructure issues in the long term. The ripple effects on overall economic activities become apparent, as many industries require more space, for things such as factories, to be near the transportation hubs such as the port. Horizontal expansion not only makes the production less competitive, but also worsens the traffic issues.

Moreover, informal land zoning and government ownership complicate accessibility and effective use of land. Informal zoning makes it difficult to obtain well-placed land for factories and other industrial uses. Also, the state owns 95% of land in Kuwait, thus parceling plots is controlled by the government.
Kuwait's land challenges have no singular solution; rather a combination of transportation infrastructure projects and demographic shifts in housing preferences can better address the burgeoning need for housing and industrial space.
The government has announced it will be building 1.2 million housing units over the next decade to fulfill its legal obligation to supply affordable housing. With more than half the population under the age of 25, the demand will likely continue to outpace supply. But fortunately, young Kuwaitis are more willing than older generations to buy apartments in pre-built towers as opposed to expensive and expansive villas. Vertical construction will be an opportunity for private sector construction companies given this demographic shift.