Articles > Lebanon, A Look At Real Estate Sector
According to Bank Audi, buyer’s sentiment on the demand side has been influence by the turmoil in neighboring countries and the political bickering since the beginning of 2012 with most investors opting to wait and see. Demand of property for sale in Lebanon contracted by 6.3% in 2011; following a 32% year-on-year growth for five years demand posted an upward movement of 4% in the second half of 2012. Although there is a slow down in demand; the total outlook is still positive. Many investors prefer making investment in real estate assets than traditional bank savings mostly because of the big decline in interests rates both domestically and globally as well as the use of realty investment as an alternative during periods of high markets volatility.
The slowdown in market demand has meant that the supply side for real estate investment in Lebanon also registered stagnation. Most of the slowdown either in the demand or the supply side has been noted on residential property. Commercial properties still command a high supply and demand. This is mostly due to the fact of a lack in modern office building. Development projects are being undertaken in Beirut and the outskirts of the capital. Baadba, Metn, Ashrafieh and Ras are areas specifically being targeted.
According to analysts, with Lebanon property prices having increased significantly over the past decade and the relatively modest purchasing power of the Lebanese population, the trend for the near future regarding property for sale in Lebanon will suffer a small setback but growth will still be significant. Only 3-4% of the Lebanese population can afford property of over $1.5 million, 20% would be able to pay property around $500,000 and over 60% can afford property for sale in Lebanon in the vicinity of $200,000.
Lebanon house prices according to Ramco have always fluctuated in a staircase. The rise in prices is followed by a period when the prices stabilize until the market digests the new prices and afterward the prices resume their upward trend. There is little if any speculation in the Lebanon real estate sector. Even though much of the stagnation is due to regional instability in neighboring countries, after a decade of rising prices it was evident to come to a period of stagnation.
The demand for bank loan has registered an increase of more than 40% during the past five years. Bank loans make up the biggest method of real estate investment in Lebanon. The total outstanding housing loan is estimated of being of more than LBP 7.27 trillion (US$ 4.8 billion). Interest rates on house loans have been falling for the past decade. Bank du Liban provides an exemption to banks of 60% of reserve requirements if the debtor rate on housing does not exceed a 3% margin.
The demand of property for rent in Lebanon is mostly driven by local residents. 60% of households live in rented properties. Most of the tenants consist of newlywed and young professionals starting with their career. The rise in house prices have lead to an increasing interest in property ownership. In general, in recent years, the Lebanese real estate market has been undergoing some corrections and evolving at a much flatter pace than in the past decade. The correction has mostly been anticipated after a period of hyper activity. It also reflects the political and regional instability in countries of the region. The real estate market in Lebanon at frequent intervals undergoes such flat lining but doesn’t reverse to a negative trend. After such correction, it is expected for the real estate sector to resume its upward trend.