"Locals constitute up the bulk of the market, with 15,000 new households per year"
Analysis about the real estate market in Lebanon often suffers from lack of accurate, reliable and objective figures. Players in the market are thus often exposed to directions that risk driving them into wrong investments, or at least not the best ones.
Bank Audi's research department has been playing an important role in covering this gap and offering to the public regular reports, specifically about the real estate market performance as well as about the economy in general... EKARUNA Magazine had a Q&A session with Dr. Marwan Barakat, head of research at Bank Audi, to expose to readers a further accurate vision for the real estate market...
Q: Why do you do this kind of research? As a bank, how is it needed?
A: We invest in research for two essential reasons. First, we provide our bank with strategic information tools that will help the management in its decision-making process. And second, we nurture the market on regular basis with economic, markets and sectorial reports for stakeholders to be knowledgeable about opportunities and risks. The real estate sector more specifically is of high economic importance, being one of the main drivers of growth. We thus have a duty towards our investors and reader base to give them insight on what are the strengths and weaknesses that this crucial sector is witnessing.
Q: How do you manage to gather the needed data in the absence of reliable official resources?
A: Most of the needed reliable data are available in one form or another in our database. We also have a big real estate department doing regular surveys of regions of interest. Sometimes we might ask for credible consultancy houses to perform some surveys for us as well.
Q: As research professional, how do you asses the performance of the real estate market?
A: Somehow it slowed down comparing to the spectacular growth, mostly in terms of prices. There hasn't been any considerable appreciation on property values lately. There isn't any stagnation though, and no serious growth either at the moment. We're not overvalued today but were rather undervalued in 2006-2007. If all factors are held constant, there's no fear of collapse in prices. They usually follow an escalator path but never fall. And anyway, the existing demand is one of end users; the speculative market is limited.
Q: How is the demand distributed at the moment?
A: Local Lebanese buyers constitute the bulk of the market. There are 900,000 households currently in Lebanon, resulting therefore in a natural growth of around 15,000 new households per year. Althought most of these currently cannot buy apartments in Beirut, due to the imbalance between their purchasing power and the nature of the housing market, they end up resorting to different solutions like moving away from Beirut, reducing their property size, getting financial support from banks or finally resorting to rent, which indicates that rental yields will increase. The Lebanese diaspora on the other hand constitutes around 40 percent. Most of these are white-collar workers and usually like to keep good ties with their home economy, thus regularly invest in secondary housing. And finally foreigners (arab nationals) make up around 10% of the market and are mostly interested in high-end properties. They come to Lebanon first as tourists, then as businessmen, end up liking the place and coming back regularly, which drives them then to buy apartments, villas, houses, etc... Percentages of foreign investments are however often affected by the political/security situation.
Q: How are Lebanon's economic figures affecting the performance of the real estate sector?
A: On the macro-economic level, the situation has been supportive to the attractiveness of the real estate sector in particular. Lebanon's GDP has scored around 8.5% of growth in the last 4 years, placing Lebanon in position number 6 world-wide over this period, while recessions and slowdowns were dominant in the world. But then Lebanon profited from that to attract huge inflows of capitals. In matter of competitiveness and business environment, we're lagging. The government needs to undergo structural economic reforms to enhance attractiveness of our business environment, a prerequisite for attracting more investments in Real Estate.
Q: What measures are banks willing to take to further enhance its role in the real estate sector?
A: Banks are currently in constructive competition in that field. As banks, 2.5% of our balance sheet is into the housing motgage sector. Exposure is thus very low comparing to the 13% that the USA had reached prior to the crisis. Our conservative practices have paid off and shielded developers against the financial crisis and I believe we will be maintaining these practices in the years ahead.
© Ekaruna 2010
