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Beirut real estate market predicted to grow 15 percent in next three years

20 November 2010

BEIRUT: Lebanon’s real estate market will grow by up to 15 percent in the next three years, director general of the Economy Ministry Fuad Fleifel said Thursday at the Beirut International Property Fair.

“Lebanon has gone against the current of the international financial crisis in the real estate sector,” said Fleifel. “Its [real estate] value has risen by 9 percent during the first eight months of 2009, with expectations that it will rise between 10 and 15 percent until the year 2013.”

The property fair, which has been taking place over the Eid holiday season at the Forum de Beyrouth, has been billed as “the largest and most important real estate exhibition in Lebanon.” According to the fair’s organizers, over 3,000 people from across southern Asia, northern Europe and the Gulf Cooperation Council countries have attended the exhibition so far. The fair will continue until Saturday evening.

Of the issues discussed at the fair’s conference, which took place alongside a 50-stand exhibition, projections about the future of Lebanon’s real estate market polarized the debate.

Several realtors questioned how the market could be expected to grow when disposable incomes across the country were dwindling.

Fleifel believes that gap can be financed by the Central Bank, which “has allowed the employee to take out a housing loan for a longer duration using the Lebanese lira.”

In recent years, the Central Bank has introduced incentives to encourage the issuance of loans to middle-to-low income clients as part of a campaign to “de-dollarize” the economy, or to boost circulation of Lebanese currency.

Fleifel said that durable loans were particularly important since 15 percent per annum price hikes may prevent people with “limited means” from becoming home owners in coming years.

“There are voices inside the Cabinet that are calling for an increase in taxes on real estate investments, and others are calling for a suspension of work on a decision to re-evaluate real estate assets, which would mean burdening the sector with heavy taxes and that would not be in the interest of the national economy,” Fleifel said.

Sources told The Daily Star that Fleifel was referring to accusations leveled by some March 8 ministers against private companies which the ministers alleged were trying to prevent asset re-evaluation in order to evade higher taxes.

Two realtors told The Daily Star that they believe that real estate growth levels since 2008 have been “abnormal,” and that while there has been an increase in demand for housing brought on by boosted confidence in the national real estate industry, a considerable portion of the price rises have been propped up by speculative pricing.

Developers have compounded the existing price rises because they were expecting further price increases, general manager of Al-Hajjar Enterprises Samer Hajjar said.

He believes that because of inflated prices the market has started to contract. “We noticed that there is a halt in demand,” Hajjar said. “This halt is justified because developers will set a price that they want, without providing matching quality standards.

“But on the other hand, you have the people who want to buy even if [the developer] sets a high price. But the salaries cannot match this price. There’s a big gap,” said Hajjar.

Hajjar does not believe that existing housing loans will help a median-income family pay minimal housing prices.

Last month, at a housing exhibit in the Beirut International Exhibition and Leisure Center, developers reported that the housing market has focused primarily on developing smaller-sized apartments outside of urban areas as a response to price rises.

Sobhi Agha, chief marketing officer of Noor International Holding which considers itself “a real estate factory” due to its mass production of real estate. and which is perhaps better known for the controversial Cedar Island project that it has tried to push through government, foresees an impending price drop.

“There is a correction coming because the boom that happened during the summer last year has been not appropriate and a correction has to come to the market, with a 15-20 percent decrease in price. When the demand meets the supply side, it will be fixed,” said Agha.

In the first quarter of 2010, Lebanon’s real-estate transactions spiked by 41 percent from the same period of 2009, totaling just over $2 billion, according to the Directorate of Real Estate. The Directorate said that the market benefited from strong economic growth as well as remittances from expatriates, which have long supported the economy during turbulent periods.

© Copyright The Daily Star 2010.