Lebanon Real Estate Newsletter Vol. 3, Issue 7 - July, 2007

 
Oxford Business Group.
Lebanon, Volume 158
13.07.2007

According to recent reports, demand for small and medium sized residential apartments has increased in the last few months inside the capital and in some of the country's regions.

Joseph Safar, sales manager for real estate and consulting firm Hayek Group, told OBG that demand for residential real estate was on the rise, mainly from Lebanese who work and live abroad, looking for affordable secondary houses. According to Safar, Beirut and its suburbs are becoming increasingly popular, citing Ashrafieh, Ramlet el Baida and Tallet el Khayat as areas of heightened interest for buyers. Outside Beirut, Ghazir, Adma and Broumana are also witnessing high demand.

"It's contrary to what we feel and think but it [the real estate sector] is independent and going its own way," he said

As a result, prices have risen by about 15-17% year-on-year, according to Safar. While soaring demand is one of the reasons for the increase, the rise in the cost of building materials and land has also contributed. Steel has risen from around $200 per tone five years ago to about $800 per tone today, according to recent media reports, while cement has increased from $75 per tone before last year's summer war to above $110 today.

According to Mario Mohanna, CEO of Patrimoine Conseil, a real estate consultancy, real estate has always been on a rising trend in the long run and this has been proven over more than 30 years. Mohanna told OBG he has figures that date back from 1969 to 2006 that confirm this trend, with minor fluctuations.

Figures for 2006 reveal that Beirut takes 33% of the total real estate transactions, Mount Lebanon (Metn, Kesrwan and Jbeil) 28% and Baabda, Chouf and Aley 24%. The remaining three regions of the south, north and Bekaa have between 3 and 7% each.

In 2006, the total volume of real estate transactions stood at $3bn, according to Mohanna. He added that these figures tend to be slightly below the real value as some people register lower values for tax reasons. He estimated the real amount to be 10-15% higher.

Mohanna added that if you compare the first quarter transactions of 2006 ($982m) with those of this year ($843m), the difference is a mere 14%, "which is not significant considering the political and economic situation. Despite everything, real estate is still going well."

Mohanna said the residential market is buoyed by consumers of all nationalities who consider the crises as temporary and who find Lebanon an attractive destination for a second home or pied-à-terre, especially on the seafront and in other prime locations.

Raja Makarem, managing partner of RAMCO, a real estate advisory company, said that a niche market for small apartments purchased by Lebanese customers is driving current demand.

"This is the real healthy backbone of the market," he told OBG. With demand being higher than supply, prices have risen as a result. Small apartments are 200-300m2 in size, and fall into the $400,000-$600,000 category.

"There is nothing less than an average of $2,000/m2 in the good areas," said Makarem. He cautioned that just because this niche segment is doing well it would be wrong to imagine the entire market is following suit.

He added though that the "enormous resilience" of the market was "amazing". Makarem told OBG that in the last two years he had not had any clients approach him to sell land, which he said he believes points to a general feeling among the Lebanese that the current political situation is temporary and that once events calm down, a boom in real estate will follow.

"This is a very good time for those seriously interested in investing in real estate," said Makarem. He added that people who understand Lebanon well know it will always have its ups and downs but, in real estate, the trend will continue upward. He pointed to one local developer who, despite not selling many properties in his current portfolio, was still acquiring multi-million dollar properties. Seasoned developers, he said, know they can sell their entire stock in a matter of weeks once the market picks up.

Most observers acknowledge that once a political solution is reached and calm restored, Gulf buyers - traditionally a huge source of purchases - will continue investing. 

Hayek Group
Beirut, Lebanon