Real estate down, but still strong

George Shahwan, the head of the real estate development in Lebanon, poses for a picture. (Photo courtesy of Plus Properties)

BEIRUT: Despite the recession witnessed by the real estate sector in the year 2013, Georges Chehwan, chairman of Plus Properties, is optimistic about the future following the Cabinet formation.

“There is a kind of a recession, but Lebanon has a population of 4 million residents and 15 million expatriates so if 1 percent of them decide to buy our real estate projects, we will be able to sell the stock available in the country, Chehwan told The Daily Star in an exclusive interview.

However, while the government formation will surely make a difference, in Chehwan’s opinion, security and political stability will be required for a full rebound in sales to materialize.

“The government will make a difference, but we need security stability to encourage expats and Arabs to invest,” he said.

According to statistics provided by Plus Properties, the highest demand on real estate in Lebanon in 2013 was from Lebanese residents (60 percent), followed by Lebanese expatriates (36 percent), Arabs (3 percent), Europeans (1 percent) and Syrians (1 percent).

Chehwan believes the Lebanese real estate sector’s strength lies in the fact it is based on real demand from residents as opposed to speculators.

“The biggest advantage of the real estate sector in Lebanon is that people buy these assets for their own use and not for speculation,” he said.

But this strength also makes the sector more dependent on the local economy.

“But what usually happens is that demand in some areas improves while in others it drops depending on the economic situation in the country and the purchasing power of people,” he said.

For instance, demand for real estate in Beirut dropped by 12 percent in October 2013 compared to October 2007 due to the increase in prices in Beirut, according to statistics gathered by Plus Properties.

While demand in other areas such as the south, the north and Baabda has remained largely unchanged since 2007, it has increased by 5 percent and 4 percent in the Metn and Kesrouan.

Chehwan said transactions in 2013 dropped by 8 percent compared to 2012, attributing this decrease to a lack of demand.

“It is normal to witness stagnation in real estate projects because there is not enough demand to meet the available supply,” he said.

However, the slowdown in the property market in recent years has not been accompanied by a correction in prices.

Prices have remained mostly stable since the end of 2010, though lower sales and the economic downturn have prompted some developers to grant occasional discounts to serious clients.

“Prices did not go down, and we do not expect a decrease anytime soon because developers have already paid huge amounts for their lands and they cannot drop their prices,” he said.

However, Chehwan noted that some developers had been forced to lower prices on larger apartments as the market demand changed from boom years.

“Demand on huge apartments went down remarkably; this is why prices on these assets have dropped only slightly, especially that people are looking more and more for smaller apartments,” Chehwan said.

In addition to being chairman at Plus Properties, Chehwan is also a member of the Real Estate Developers Association of Lebanon. REDAL was established last February to address the challenges facing the real estate sector in Lebanon and work with officials to improve the industry in Lebanon.

“REDAL includes 23 members, and it was established to take care of a sector as important as the real estate sector,” he said.

Chehwan said one of the serious problems facing the sector was the lack of accurate statistics.

“It is one of the issues that REDAL is planning to take care of,” he said.

Chehwan said the absence of accurate statistics was exacerbated by the fact that many developers don’t start construction right away after receiving a permit from the Syndicate of Engineers.

“Some developers do not start right away because the permit lasts for six years,” he said.

Chehwan said that REDAL planned to call upon the government to provide developers with the right to build more floors in buildings located in certain areas, allowing them to offer lower prices by spreading the land costs over more sellable square meters.

“We also aim at asking the government to come up with a better transportation system in order to encourage people to consider moving to areas outside Beirut,” he said.

He added that REDAL was also planning to ask the Central Bank to assist developers by minimizing interest rates on loans.

According to statistics by Plus Properties, loans given by banks to developers for residential projects went up from $1.5 billion in December 2012 to $1.716 billion in October 2013. Loans for commercial real estate projects increased from $2.524 billion in December 2012 to $2.835 billion in October 2013.

A version of this article appeared in the print edition of The Daily Star on February 18, 2014, on page 5.




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