Lebanon’s real estate market has long been an economic point of pride for the country, whose post-war recovery was largely due to massive real estate projects igniting other sectors along the way.
The current real estate situation is a point of concern for most, as people are wary of investing big sums of money into fixed assets, awaiting a more stable state of affairs. While some economic stability may have been achieved prior to November, Mr. Hariri’s resignation did stir some consumer confidence in the market. The sector can only hope that the parliamentary elections expected in May of 2018 will allow for the restoration of market confidence, with the emergence of a new political arena, higher monetary safety, and further security across the country.
A key in stabilizing the economy over the years, Banque du Liban (BDL) – Lebanon’s central bank – allocated a total of $5.9 billion USD as part of a program launched in 2013 to benefit a range of sectors of which real estate, back when various banks could no longer benefit from exemptions on their reserve requirements. This credit led property developers and consumers to rely on the disbursement of BDL-subsidized mortgages. Therefore, when earlier in February of this year, the Central Bank of Lebanon issued a new circular with amendments on subsidized loans, this led to an increase by the Housing Bank of the interest rate from 3% to 3.75%, and the lowering of the payment period from 30 to 20 years.
A 50% increase in monthly payment meant that many homebuyers could no longer afford the apartments they previously could. In order to finance their purchases, property shoppers in Lebanon tend to either get a loan from the Public Corporation for Housing (mid to low-income shoppers), or from the Housing Bank if the price is on the higher end. Though PCH loans allow mortgagors to finance home refurbishing/restoration or the expansion of an existing home, prices for new apartment units are so high that the financing of an apartment in Beirut via a PCH loan is mostly out of question.
Another factor holding back new real estate investment is the lack of market confidence of Lebanese expats and Gulf investors – the prime clientele of big and luxurious apartments in Beirut. The situation was made worse by the travel warnings issued by GCC countries, pushing expats and Gulf nationals to halt their investments, which heavily affected the luxurious segment of the residential property market.
The government is attempting to stimulate investment through an initiative by BDL, in conjunction with the ministry of foreign affairs, tailored to Lebanese expatriates with high purchasing power. The so-called expat mortgage allows Lebanese residing outside the country to borrow at a 2% fixed rate for up to thirty years. Another such attempt is the announcement of Article 50 of the 2018 budget, according to which any foreign national who invests in a property starting at $330,000 USD outside Beirut or $500,000 USD in Beirut would be granted a permanent Lebanese residency.
The commercial and retail sector seems to be undergoing a period of slowdown as well, affected by the recent political instability. Commercial rentals are generally in high demand in Beirut, given the secure nature of such investment for new businesses, and the fact that rental fees are affordable, especially with current commercial properties’ selling prices. Nevertheless, a significant number of multinational companies are either relocating offices to areas outside of Beirut or even setting up an office abroad.
Amidst it all, Propertyfinder has once again managed to maintain a level of stability in reaching the right audience throughout the year. YOY calculations have yielded impressive results; impressions have increased by nearly 25% on average, with Beirut and Baabda scoring 49.1% and 45.9% respectively. Property Page View has also witnessed significant growth (50%), with a staggering 93.3% increase in Baabda, 60.2% in Beirut, and 49.5% in Jbeil. Click Through Rate on the other hand has expanded by 18.7% on average, with Baabda and Jbeil yielding 32.8% and 49.5% growths respectively.
YOY Conversion Rates do however portray the current political and economic situation, as they move in parallel with market uncertainty variables. The conversion rate dropped by 32.3% on average; the number of visitors may have grown, but the current situation has done little to convert new visitors into leads.
Whether housing prices will deflate in line with local purchasing power is yet to be seen, but low interest financing remains available through the Public Corporation for Housing and the Housing Bank. Three decades of experience may also dictate that despite all of the uncertainties, the real estate market – one of the backbones of the Lebanese economy – will once again prove resilient and hold despite regional turmoil and a drop in personal wealth and property demand, as it has so far managed to do.
General Manager of Propertyfinder Lebanon
April 11, 2018