Housing Affordability in a Resource Rich Economy: The Case of Kuwait

This paper seeks to test the impact of new policies introduced to the Kuwaiti housing market to improve affordability. In 2008, the Kuwaiti parliament introduced two policies: a tax on empty lands and the other on forbidding companies to own or develop residential lands or houses. We constructed the housing affordability index and the price-to-income multiplier to measure housing affordability performance. We used observations from 2004 until 2017. We found that affordability has worsened over time regardless of the new policies introduced in 2008. Housing in Kuwait became “severely unaffordable” (equivalent to London in the U.K., San Diego in U.S. and Toronto in Canada). Even with its unique condition, as a rich country, small population and availability of white land and other resources, the affordability worsened over time. Introducing new policies without solving the central issue of housing supply challenges seems not worth it. This paper is the first of its kind on the Kuwait housing market, and it provides a valuable foundation for future research on this market and similar markets in the region