BEIRUT: Lebanon’s real estate market continues to suffer from regional instability despite more noticeable demand from wealthy Syrian nationals, brokers and developers said after the sector registered a double-digit decline in the first two months of 2013.
Total real estate sales transactions fell to 8,547 in January and February, 18.93 percent less than the 10,543 transactions recorded in the first two months of 2012, recent data shows. The total value of real estate transactions fell 21.13 percent to $920 million from $1.16 billion over the same period.
Construction permits, which reflect the future supply of apartments, also saw a significant decline in the same period, falling 26.81 percent to 1,392,033 square meters, down from 1,901,863 sqm at the end of Feb. 2012.
“Demand is well below supply in the real estate market right now, but prices continue to remain high,” regional sales manager at Plus Properties Nicolas Mehchy told The Daily Star. “This is why you have such a sizable decline in the number of transactions.”
Mehchy added that despite price stability, discounts of up to 15 percent are becoming more common, which could be an indication of a price slide in the future if low demand persists.
The decline in value, added Mehchy, is explained by the ongoing shift from large luxury apartments to smaller and more affordable ones.
Given the trend, some new construction projects by Plus Properties and other developers are even making significant allowances for very small one bedroom studios in planned developments. “Small apartments are definitely the easiest to sell these days,” he said.
Mehchy said demand from Syrians escaping the conflict in their country was not insignificant “but did not yet reach a level where you can say it is shoring up the whole market.”
He added that rent prices had gone up slightly in several areas including in the Metn, north of Beirut, and within the capital because of demand by Syrians.
Demand for buying apartments by Syrian nationals is low but is increasingly noticeable in the market, he added.
“Many Syrian businessmen now operating in Irbil and Dubai have been considering the purchase of an apartment, but not too many deals have been sealed yet,” he said.
Mehchy noted that many Syrians were abandoning the idea of purchasing apartments in Lebanon in favor of more stable markets where the real estate offerings were more attractive.
“The real estate market in Lebanon remains arbitrary [in terms of pricing] and much less professional than in Dubai, for instance,” he said.
Aline Chiha, a broker at JSK real estate, said the decline in the market was explained by zero demand for properties above the $500,000 mark.
“The market for properties like villas, large lands or luxury apartments is almost nonexistent,” she said. “It seems like those with enough capital to purchase high-end properties are nowhere to be seen in Lebanon.”
“The market as a whole is stagnating as well,” she added.
Chiha echoed Mehchy’s views, saying demand for small apartments had remained relatively healthy, particularly after the Central Bank launched the stimulus package of which more than 50 percent targets the real estate sector.
In January, the Central Bank said it would give LL2.2 trillion ($1.46 billion) in credit facilities to banks at a 1 percent interest rate. The stimulus package targets the real estate sector with over 50 percent reserved for housing with a ceiling of LL800 million per loan.
Both Mehchy and Chiha said their firms were now targeting Lebanese expats who could benefit from the low-interests loans supported by the Central Bank and were less affected by the stagnating Lebanese economy.