BEIRUT: Despite the constant din of apartment construction in Beirut and the dire outlook of the luxury market, rents and sale prices in the capital remain stubbornly high. Many of the new properties that will come on the market in 2013 will be geared toward the dwindling class of buyers who can pay upward of $1 million for a residence. The consensus among multiple residential brokers and developers interviewed by The Daily Star is that Lebanon’s deflating real estate bubble will burst in 2013 – if it hasn’t already – and heightened demand from Syrian refugees will keep rents up.
Though much-needed smaller units of between 150 to 200 square meters are expected to come on the market over the next couple of years, none of these trends will likely result in a windfall of bargains for Beiruti apartment hunters who have contended with too little access to affordable housing for far too long.
Real estate figures from the second half of 2012 show that while sales had fallen by more than 10 percent year-on-year in October 2012, the value of transactions increased 18 percent since September, meaning neither the glut of unsold luxury units on the market nor the smaller apartments under construction had much impact on prices in Beirut.
Alex Demirdjian, general manager of the Demco Group, the investment arm of Lebanon’s largest steel company, Demco Steel, acknowledged that Arab demand for 300-500 square-meter apartments that cost $1 million or more has stagnated over the past six months, but demand from middle-to-upper income buyers for smaller units in the $200,000-$400,000 range remains high.
“Now if you ask anyone in Lebanon, they will tell you the [residential] market is not good, it has dried up,” Demirdjian told The Daily Star. “If you try to go to $600,000 to $700,000, people can’t afford it, so about two years ago we started developing 180-square-meter apartments like they have in cities in Europe. Couples can put $50,000 down payment and make monthly installments on the rest. The market is still very strong in this segment.”
Citing an example, Demirdjian said that Demco was able to sell all 60, 150 to 200-square meter units in its new 30-story building in Antelias about four months ago by marketing them on the Internet. Demirdjian said that many similar construction projects are under way with 150-250-square-meter units geared to middle and upper-income buyers. “By 2015 the market will be saturated,” he said.
Numerous brokerage firms told The Daily Star that the demand for these units is rising as the luxury market feels the pinch. The owner of the MetreKarre brokerage firm, Emilio Khoury, says apartments over $1.5 million are taking much longer to close. Prices remain stable, but he noticed that owners are more open to negotiating now than they have been in the past. “It is definitely a buyers’ market,” he said. “People are willing to go down in price now unlike one-and-a-half years ago when owners wouldn’t budge.”
Khoury said that most of the recent sales MetreKarre has closed lately are on smaller apartments in the range of 140-to-240 square meters, but he expects more units of between 80-to-135 square meters to come on the market in the next few years.
“A lot of people are living abroad and don’t want to make a huge investment but still come back to Lebanon a lot,” he said of the buyers these new apartments are geared to.
“Also, the higher market, people who have kids and buy apartment as an investment because it will eventually yield a steady rental income. When market improves again they can sell it. Basically, it beats money in bank.”
But don’t expect the impending glut of smaller units to exert much downward pressure on prices.
“Low-end and mid-range [properties] are not affected by market slowdown. Because prices are high and there is a disparity between the purchasing power of households and the existing [housing] stocks,” said Marwan Barakat, head of Bank Audi’s research division. “What we are witnessing is a shift in demand from outside Beirut to the suburbs.”
While Beirut used to account for 40 percent of total construction permits in Lebanon four or five years ago, Barakat said, now it accounts for 30 percent.
Skyrocketing rents will also continue to be a feature of Beirut’s residential market in the near future, Barakat reckons. According to the Central Administration of Statistics, rents have risen 40 percent over the past year.
Wafic Nabulsi of Vertica properties, like all of the brokers The Daily Star spoke to, attributed increased rents to demand from Syrians. Though about 20 percent of them want luxury apartments from between $50,000 to $70,000 per year in Solidere and Caracas, Nabulsi estimated, the rest are looking for apartments in the range for $18,000 to $30,000 per year from 100 to 250 square meters.
The situation is similar in Ashrafieh as well, according to Michel Abou Zeid, the manager of the Beirut brokerage National Properties in Saifi, Gemmayzeh, and Mar Mikhael.
Prices for small apartments have risen 30 or 40 percent this year, Abou Zeid said. A small unfurnished studio now rents for about $500 per month on average, while a one bedroom goes for $700 to $800 a two bedroom for between $900 to $1,200. Units in brand new buildings are at least $2,500.
However, interest from Lebanese, who prefer to buy, has declined for the past two years, Abou Zeid said.
“Lebanese are always waiting for better bargains, but there were no deals in Beirut,” he added. “Now is the best time to get deals.
Abou Zeid said he recently sold an apartment in Ashrafieh for 25 percent below the list price of $525,000. Imad al-Hasan, owner of Sakan Real Estate, a brokerage firm that specializes in prime residential high-end properties, said the owner of the last apartment he closed on two months ago, a 4,000-square-meter unit listed at $1.65 million agreed to go down to $1.5 million. Though Hasan has noted a little more willingness to negotiate among owners of apartments in the range 450 square meters – they might go down between 5 and 10 percent – prices in the $500,000 to $1.5 million range are frozen.
In Ras Beirut, the situation is similar to the rest of central Beirut, according to Janmarie Haggar, the owner JHM Estates. Syrian refugees and an influx of aid workers continue to push up rents and two-bedroom flats are in high-demand.
In Hamra, a two-bedroom flat in a decent building with a concierge and a generator will rent for about $2,000 per month, Haggar says. Landlords ask for the full-year in advance, but usually they will accept six months, and occasionally three months rent up front. If you want to buy a nice flat in Ras Beirut with parking, a generator, and decent finishing, Haggar says, you need at least $1 million.
“I have an impossible dreams club that I place people in when they come to me and say they want a two-bedroom apartment in Ras Beirut with parking, a concierge, and a sea view and don’t want to hear the sound of construction or a mosque for $250,000,” she quips.
Though she has noticed a marginal increase in the number of 100-120-square-meter apartments in Ras Beirut and more developers are building in multiple sizes for different earners, the area is sorely in need of smaller apartments, Haggar says.
“That’s the tragedy,” Haggar said of the housing situation. “That’s why all the young men and women are leaving Lebanon because the salaries are not enough for them to buy or rent an apartment. You see the exodus of young men and women because they can’t find a place to live.”