#lebanon real estate
Lebanon’s property market remains depressed, amidst regional political turmoil
by Lalaine C. Delmendo
Itґs no surprise, given Lebanonґs slow economic growth, heightened domestic political bickering and the ongoing war in neighboring Syria, that things donґt look so hot in its property market.
Property prices are falling. Sales transactions continue to decline. And while thereґs more construction, it remains far below pre-crisis levels.
During the year to end-Q2 2015, nationwide property prices fell by 6% (-2.74 inflation-adjusted), to an average of LBP188.71 million (US$125,000), according to Bank Audi. This was the fourth consecutive quarter of y-o-y property price falls.
During the latest quarter property prices were nominally unchanged, thought they actually increased by 1.13% when adjusted for inflation.
The Lebanese property market has experienced strong house price rises in recent years:
- In 2009, average property sales prices rose by about 48.4% y-o-y (43.5% inflation-adjusted)
- In 2010, average property sales prices increased by 7.37% y-o-y (2.7% inflation-adjusted)
- In 2011, average property prices rose by 9.8% y-o-y (6.5% inflation-adjusted)
- In 2012, average property prices rose by 6.25% y-o-y (-3.51% inflation-adjusted)
- In 2013, average property sales prices rose by 16% y-o-y (14.7% inflation-adjusted)
- In 2014, average property sales prices dropped 1.61% (-3.87 inflation-adjusted).
House prices in several areas of Lebanon doubled from 2008 to 2012, mainly due to increased demand from GCC investors after the oil price surge in 2008.
Buyers are looking outside Beirut
Because prices remain high, homebuyers have been moving out from Beirut, the capital, to look for cheaper housing. During the first seven months of 2015, Beirut accounted for just about 26.2% of the total value of property transactions, down from about 37.2% in 2007, based on figures from the Real Estate Registry.
Less expensive nearby areas, such as Baabda, Metn, and Kesrouan accounted for almost 54% of the total property sales in the first seven months of 2015, up from 47.3% in 2007.
Property prices and sales transactions in Lebanon are expected to continue falling in the coming months, according to local property experts.
The economy is expected to grow by a modest 2.5% this year, after annual GDP growth rates of 2% in 2014, 2.5% in 2013, 2.8% in 2012 and 0.9% in 2011, based on figures from the International Monetary Fund (IMF).
Lebanonґs religious communities maintain a watchful equilibrium. To maintain the balance of power between religious groups, the president must be a Maronite Catholic Christian, the prime minister a Sunni Muslim, the deputy prime minister an Orthodox Christian and the speaker of parliament a Shi’a Muslim. The 128 parliamentary seats are equally divided between Christian and Muslims.
The country’s economy and populace were ravaged during the Lebanese Civil War from 1975 to 1990. From the 1990s to the early-2000s, there was an uneasy calm, with external forces and militant groups occupying different parts of the country.
In 2005, former Prime Minister Rafik Hariri was assassinated. Then in July 2006, the Israel-Hezbollah War erupted, which caused large-scale damage to Beirut, undoing much of the good work done in the post-Civil War reconstruction programme. In May 2007, the violent Nahr al-Bared conflict, the most severe internal fighting in almost two decades, exploded and ravaged some parts of the country.
Finally in May 2008, the Doha Accord marked the end of an 18-month long political crisis. Local political and security conditions improved considerably, with the Lebanese government determined to pursue reforms focused on achieving economic revival, sustainable growth and political stability.
The political stability in the country helped the economy grow strongly, with an average annual GDP growth rate of 9.2% from 2007 to 2010.
However political tensions brought down the government of Prime Minister Saad al-Hariri in January 2011. He was succeeded by Najib Mikati, whose cabinet is dominated by Hezbollah and its allies.
In June 2011, the UN issued arrest warrants for four members of Hezbollah in the murder of former PM Rafik Hariri. Hezbollah was uncooperative and refused to allow any suspects to be arrested. Tensions have been exacerbated by the Arab Spring since December 2010.
By mid-2012, the Syrian conflict which began in March 2011 had spilled over into Lebanon in deadly clashes between Sunni Muslims and Alawites in Tripoli and Beirut. This raised fears that Lebanon’s already fragile political truce could collapse again into a sectarian strife. The number of Syrian refugees in Lebanon rose to over one million in April 2014 from about 700,000 people in September 2013. This has placed a severe strain on the countryґs resources.
Then in March 2013, Najib Mikati’s government resigned amidst political tensions over upcoming elections. General elections, due last November 2014, were put on hold until 2017 due to security concerns over the conflict in Syria.
Economic growth has slowed sharply in the past four years, with annual GDP growth rates of just 2% in 2014, 2.5% in 2013, 2.8% in 2012 and 0.9% in 2011, based on figures from the International Monetary Fund (IMF). The economy is expected to grow by 2.5% this year.
The number of tourist arrivals dropped by an average of 16% per year from 2011 to 2013. But surprisingly in 2014, tourist arrivals increased by 6.4% y-o-y to 1,355,000 persons. In the first half of 2015, tourist arrivals rose again by 14.7% to 671,000 persons compared to the same period last year.
Property price variations
In Beirut. the average price of a 1st floor apartment under construction stood at LBP5.6 million (US$3,720) per square meter (sq. m.) in the second quarter of 2015, based on figures from a recent study conducted by Ramco Real Estate Advisers. The average price of a 238 sq. m. apartment was LBP1.33 billion (US$885,360).
- The Central Business District (CBD) has the most expensive land in Beirut. The average price of a 1st floor apartment was LBP10.07 million (US$6,679) per square meter (sq. m.). The average price of a 331 sq. m. apartment stood at LBP3.33 billion (US$2.21 million).
- Outside the CBD. 1st floor apartment prices ranged from LBP7.39 million (US$4,900) to LBP7.91 million (US$5,250) per sq. m. in high-end neighbor hoods such as Ain el Tineh and Sursock. On the other hand, in mid-market neighborhoods of Ashrafieh. the price of first-floor apartments start at around LBP3.92 million (US$2,600) per sq. m.