BEIRUT: The political deadlock over Cabinet formation and the volatile situation in the region have started to take their toll on Lebanon’s once booming real estate sector, with total sales of properties falling 21 percent in the first four months of this year.
According to figures released by the Directorate of Real Estate at the Finance Ministry, property transactions registered at the ministry reached 23,563 in this period, a drop of 21.3 percent compared to the same period of 2010.
“The contraction in real estate activity is attributed to the prevailing political tensions in the country and to the regional turmoil that is negatively impacting investor sentiment at large. This is attested by the yearly drop of 31.9 percent in sales transactions to foreigners over the first four months of 2011,” Bank Audi’s publication, Weekly Monitor, said.
The decline in demand for property in Lebanon during the first four months of this year was also accompanied by a fall in the value of property sales during the period, but the drop was relatively much smaller, showing that prices of property in Lebanon have not changed dramatically.
The value of property sales in this period reached $2.449 billion, down by 16.0 percent relative to the first four months of last year.
As such, the average value per property sale in the first four months of 2011 went up by 6.7 percent relative to the same period of 2010 (to reach $104,000).
But the prices of apartments in Beirut and Mount Lebanon did not fall accordingly, although some brokers admit that the prices of luxury apartments in the capital have fallen by 10 to 20 percent.
Lebanese expatriates and Gulf backers invested more than $4.5 billion in real estate in 2010, prompting developers to raise the prices of properties to levels never before reached in Lebanon.
Experts say that most of the investments and money being channeled out of some of the Arab states witnessing uprisings have either fled to European countries or Dubai.
But despite the large fall in property sales, the prices of small to medium apartments in Beirut and other regions across the country remained the same.
According to media reports, many multi million dollar luxury residential projects in Beirut have been put on hold by their developers until further notice. These developers believe that demand for luxury apartments will pick up again once a Cabinet is formed and once the situation in Syria and other Arab states becomes more stable.
Surprisingly however, the drop in real estate demand has not deterred the developers from seeking more construction permits in the capital.
But most of these permits involved small to medium size apartments as these units are in high demand among average income Lebanese families.
Figures released by the Order of Engineers in Beirut and Tripoli reveal that the area of newly issued construction permits reached 1,538,171 square meters in April 2011, up by 16.2 percent relative to the same month of the previous year.
This rise follows a drop of 20 percent in March 2011 compared to the same period in 2010 and an increase of 17.2 percent registered in the first two months of 2011 relative to the same period in 2010.
The majority of construction permits issued in March, 47.6 percent, were for Mount Lebanon. This was in line with the growing demand for property in the region by Lebanese residents, as prices in that area are lower than in the capital. It was followed by the North with 18.2 percent, the South with 17.8 percent, Beirut with 8.6 percent, and the Bekaa with 7.7 percent.