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A buyer’s market

Ask developers, brokerage firms or research analysts for an overview of Lebanon’s real estate market and you’re almost guaranteed to hear the same answer: It’s a buyer’s market. 

A buyer’s market is a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. Industry experts say this situation is unlikely to 

change in 2016 in the absence of a major political breakthrough on the domestic level and a stabilization of the ongoing conflict in nearby Syria.Thus, the real estate market is expected to continue its downtrend in 2016 after sluggish activity in 2015. The total number of property sales transactions registered 63,386 in 2015, down by 10.5 percent relative to the 70,795 transactions registered in the previous year.The total value of property transactions fell by almost the same percentage from $8.9 billion in 2014 to $8 billion in 2015.Likewise, property taxes fell by 13.6 percent year-on-year, from $502 million to $433 million. Cement deliveries, a coincident indicator of construction activity, decreased by 9.4 percent  year-on-year in the first 11 months of 2015, according to the central bank statistics. Cement deliveries reached 4,595 thousand tons year-to-November 2015, down from 5,072 thousand tons in the corresponding period of 2014. Construction permits, an indicator of future supply, were also down in 2015. Construction permits delivered by the Orders of Engineers of Beirut and Tripoli covered an area of 12,339,176 square meter in 2015, a net contraction of 8.9 percent from the 13,545,707 square meter registered in 2014. Real estate demand shifts to suburbsThe share of the capital Beirut in terms of construction activity continued to decline signaling a shift in demand for more affordable residential units outside the capital. The average asking price in Beirut Central District records the highest market price at $6,679 per square meter for first floor apartments averaging 331 square meters. Outside Beirut central district, developers are asking between $4,900 and $5,250 per square meter in high-end neighborhoods such as Sursock and Ain el Tineh charge while midmarket neighborhoods of Ashrafieh post prices around $2,600 per square. These prices don’t take into consideration the negotiation margins that actually take place on the market. According to a study by RAMCO Real Estate Advisers, the average price of apartments in Beirut has declined by 4 percent in 2015 as the number of unsold apartments increased. The study covering 345 residential buildings across Beirut revealed that out of 1,213 completed residential apartments, 24 percent were unsold in 2014.Developers outside Beirut have been faster to adapt to the shift in demand from large toward small-size apartments and have benefited from increased demand on more affordable housing units outside the capital, experts say.As a percentage of the total value of property sales, Beirut’s share shrank from 27.3 percent in 2014 to 24.9 percent in 2015. Metn’s share, on the other hand, rose from 17.7 percent to 19.6 percent, while Keserwan’s share increased from 11.5 percent to 12.6 percent. As a percentage of total construction permits, Beirut’s share dwindled from 6.9 percent in 2014 to 5.4 percent in 2015 and the share of the area covered by the Order of Engineers in Tripoli declined from 17.6 percent to 16.6 percent. Mount Lebanon, which has consistently had the lion’s share saw this share rising from 46.2 percent in 2014 to 47.9 percent in 2015.Real estate prices resilientDespite the contraction in construction, property prices, however, did not witness noticeable declines but were limited to discounts up to 25 percent. The relative stickiness of prices remain tied to the structural aspects of the property market in Lebanon, namely the quasi absence of speculative activity, the scarcity of land and the low leverage among developers.Construction loans made up 18 percent of the total loans granted in the financial sector up to July 2015. The value of these loans amounted to $9.99 billion by July, rising by 4.08 percent since year-start. Similarly, the number of borrowers also rose by 5 percent since the beginning of 2015 to hover near the 13,000 mark by the end of July 2015. Housing loans, on the other hand, maintained their upbeat performance, yet at a slower pace with their total value standing at $10.4 billion by July 2015, a 5 percent increase since year start. Worth mentioning that housing loans almost constituted 18 percent of total outstanding private loans by July 2015 compared to 6 percent in 2008. In addition, housing loans at Lebanon’s commercial banks almost doubled from 2011’s level of $5.98 billion with the number of borrowers rising by more than 25,000 over the 5-Year period. Foreign investors maintain share in Lebanese market Foreign demand for properties in Lebanon slightly rose in 2015, following several years of 

dwindling performance. Even though minimal, foreign built property transactions accounted for 3.7 percent of total built real estate transactions by November 2015 compared to a 2.8 percent share by November 2014. In absolute terms, the number of built units’ transactions went up from 973 by November 2014 to reach 1,156 transactions in 2015, near 2011’s level. The value of these transactions rose by 2.7 percent y-o-y to $384.99 million by November 2015.