BEIRUT: Lebanon’s real estate and construction sector is adapting to the dearth of foreign investment, shifting its focus to Mount Lebanon and Beirut’s suburbs to meet a growing local demand.
“Construction in Beirut is relatively stagnant when compared with other regions in the country” said Elie Souma, head of the Lebanese Association of Real Estate Trade and Development.
While the country as a whole saw a 2.7 percent increase in construction permits in the first half of the year compared with the previous year, Beirut had the lowest number of any of the country’s regions, according to the Order of Engineers in Beirut and Tripoli.
Mount Lebanon led the increase in construction permits, accounting for 43 percent of all permits issued in the first half of 2014. Just 5 percent of the country’s construction permits were issued in Beirut.
“The stagnancy in Beirut is because of the lack of foreign investment and the absence of expats,” Souma said, arguing that the market in the capital was usually restricted to wealthy foreigners due to the high prices.
Souma’s assessment is supported by numbers from the Finance Ministry, which reported that real estate transactions executed by foreigners has dropped by 14 percent in the first half of 2014 in comparison with the previous year.
Souma said the slow demand for apartments in the capital had shifted construction and real estate projects out of Beirut, “specifically [to] the areas of Kesrouan and the Metn in Mount Lebanon.”
According to Souma, the boom in construction in Mount Lebanon also partially results from lower activity in north Lebanon and the Bekaa Valley.
After Beirut, north Lebanon and the Bekaa Valley were the least active regions in the construction sector, with just 120 and 866 permits respectively during the first six months of 2014.
“The inactivity in these regions is due to the tense security situation,” Souma said, adding that this year’s clashes in the Bekaa and the north had motivated many residents to move to the more stable Mount Lebanon.
While the security situation dissuaded foreign investments, Souma said local demand was less affected due to generous loans by the Lebanese Public Housing Institute.
“Had there not been so many loans from the Public Housing Institute, then the security situation would have imposed itself negatively on local demand,” Souma said.
Foreign direct investment fell by more than 25 percent in 2013 and the trend is expected to continue this year in view of the tense political and security situation in the country.
Most of the foreign investments were in Lebanon’s real estate sector.
Souma expects construction and property sales to continue on an upward path in the second half of 2014, saying that the past week has witnessed a trending increase in sales.
“With the return of [Former Prime Minister] Saad Hariri, many are considering buying property before prices go up,” Souma said, adding that the Future Movement leader’s return to the country after three years in self-exile signaled potential stability and economic prosperity.
“All it takes is three months of stability, if we have that, then construction and property sales will continue to grow throughout the year.”