| 31 Mar 2011 |
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Real estate demand down more than 18 percent
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31 March 2011
BEIRUT: The demand for property in Lebanon shrunk in the first two months of this year, in a trend some economists project could continue until the end of 2011 if the political situation remains tense and economic growth falls further.
Real estate activity in the country has fallen since the beginning of the year, according to the Finance Ministry’s directorate of real estate.
The total number of property sales transactions declined by 18.7 percent in the first two months of 2011 relative to the same period of 2010, to reach 10,630 transactions.
“This drop in real estate transactions in Lebanon is only natural given the sensitive political nature which the country is passing through. We should also take into account the slow economic growth as well as the saturation of newly built apartments across the country,” economist Ghazi Wazneh told The Daily Star.
Early in 2010, Wazneh and other economists predicted a drop in real estate transactions in 2011.
Real estate has caught the attention of many Lebanese and Arab investors trying to find a quick way to double and triple their investments in a short time.
Many Arab investors, who suffered billions of dollars in losses in stock exchanges in the United States, Europe and some Asian countries during the global recession of 2008, felt more comfortable to channel part of their massive assets to Lebanon and went on a real estate shopping spree.
Lebanese expatriates, particularly those in the United Arab Emirates, Qatar and Saudi Arabia, also saw opportunity in the real estate sector at home.
As a result of this unprecedented interest, real estate transactions in Lebanon in 2010 alone stood at more than $8 billion, or one third of the country’s GDP.
“Even if the political situation in Lebanon becomes more stable, the demand for properties will probably fall by 20 percent at the end of 2010,” Wazneh said.
He added that luxury apartments with a price tag of $1 million or more are no longer attracting investors.
“I know for sure that many giant real estate projects have either been scrapped or postponed until further notice. Most of these projects involve luxury apartments in the capital,” the economist said.
He added that prices of luxury apartments may fall by 15 to 20 percent in the future while prices of medium and small-size flats will remain stable because they are in demand from many limited income families.
“We won’t have a real estate bubble as in the case of other countries. But I am sure that prices will become more reasonable in the future,” Wazneh said.
The Finance Ministry said the contraction in real estate activity can be attributed to the prevailing political tensions in the country and to the regional turmoil that is negatively impacting investor sentiment at large.
Real estate transactions with foreigners have also seen a significant drop, of 26.4 percent, compared to the first two months of 2010.
The decline in demand for property in Lebanon was accompanied by a significant increase in property prices during the reporting period.
While the number of transactions significantly decreased, the overall value of property sales was down by a relatively small 1.1 percent compared to the same period last year. Real estate transactions in the first two months of the year were worth LL1.805 trillion.
“This drop is much smaller than the drop in the number of transactions and has therefore resulted in a substantial increase of 21.6 percent in the average value per property sale in the first two months of 2011 relative to the same period of 2010 for it to reach LL169.8 million,” the ministry said. – The Daily Star
© Copyright The Daily Star 2011.
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