By Wissam Moubarak
With prices in the capital among the highest in the Middle East, investors look to rental demand outside Beirut for investment inspiration
In recent years, Lebanon has faced an undeniable economic slowdown, and yet, average real estate property prices seem to have been sustained.
This may be good news for the economy, but the current level of prices continue to remain out of reach of those in the middle-income strata.
Over a nine year span, the cost per square metre of apartments in central Beirut rose from $1,200 in 2004 to up to $4,700 in 2013, a 400% increase based on research by Global Property Guide, owing partly to an influx of investors from the GCC post 2008.
Beirut witnessed a 9.4% increase in average property prices, reaching $519,991 per medium-sized apartment, according to Lebanese financial institution Bankmed’s 2017 study of the real estate market.
The capital is considered as one of the most expensive cities in the Middle East and North Africa region. Real estate prices average $3,693 per square metre. It takes an average of 22 years of rental income to make up for the cost of investing an apartment.
Meanwhile, construction activity since the period has been weak and prices have since stagnated, even declining marginally. In the quarters since, until Q3 2017, they fell 3.52% when adjusted for inflation, according to the Lebanese Directorate of Real Estate.
There also remains a large pool of unsold property. Research by real estate consultancy RAMCO indicates that there were roughly 3,600 unsold apartments in Beirut as of November 2017, outnumbering buyers and forcing developers to offer significant discounts to facilitate sales. Outside of Beirut, property prices rose by a 1.4% in 2016, standing at an average of $102,039.
Listing leads and clicks for property on Propertyfinder in Lebanon doubled in 2018, indicating strong market demand for rentals and allowing property prices to maintain within a range. The majority of real estate investment transactions, more than 60%, in 2018 so far have been accounted for by residential property.
This is because while Beirut still ranks first with respect to demand for residential rent, however, prospective buyers are in no rush to make housing purchases amid low consumer confidence, triggering a shift from buying to renting and pushing rental prices higher.
With Beirut’s property prices, at about four times the national average, deemed unaffordable to most despite constrained demand, many buyers are looking to locations outside of Beirut for cheaper housing.
Interest is growing in smaller-sized apartments on the outskirts, particularly in areas considered affordable, such as Baabda, Metn, and Kesrouane.
In terms of policy Banque du Liban’s (BDL) persistence in boosting the real estate sector has managed to shyly stimulate demand. But BDL’s latest decision to suspend lending to banks at subsidised rates has tightened lending conditions. Recent tax reforms are also decreasing purchasing power and weighing down on real estate.
Our expectation is that the increasing oil prices and a continuation of an improving political climate in the latest elections will attract foreigners, specifically GCC investors, to invest in the Lebanese real estate sector, and help keep the market afloat.
Wissam Moubarak is country manager, Propertyfinder Lebanon