It is no surprise, given Lebanon’s slow economic growth, increased domestic strife of politics and the ongoing war in neighboring Syria, that things do not look so hot in its property market.
Property prices are falling. Sales transactions continue to fall. And while there’s more construction, it remains well below pre-crisis levels.
During the year to the end of Q2 2015, real estate prices nationwide fell by 6% (-2.74 inflation adjusted), to an average of LBP 188.71 million (US $ 125,000), according to Bank Audi. This was the fourth consecutive quarter of y-o-y falling property prices.
In the last quarter property prices were nominally unchanged, thinking they have actually increased by 1.13% after adjusting for inflation.
The Lebanese real estate market has experienced strong increases in house prices in recent years:
- In 2009, the property of average selling prices increased approximately 48.4% y-o-y (43.5% adjusted for inflation)
- In 2010, the property of average selling prices increased by 7.37% y-o-y (2.7% adjusted for inflation)
- In 2011, real estate prices rose an average of 9.8% y-o-y (6.5% adjusted for inflation)
- In 2012, the average house price increased by 6.25% y-o-y (-3.51% adjusted for inflation)
- In 2013, the property of average selling prices were up 16% y-o-y (14.7% adjusted for inflation)
- In 2014, the property of average selling prices fell 1.61% (-3.87 adjusted for inflation).
Home prices in many parts of Lebanon doubled from 2008 to 2012, mainly due to increased demand from GCC investors after the oil price shock in 2008.
Because prices are still high , buyers have been moving from Beirut , the capital, to find cheaper accommodation .
In the first seven months of 2015, Beirut represented about 26.2% of the total value of real estate transactions , down about 37.2% in 2007 , according to figures from the Real Estate Registry, neighboring regions less expensive , such as Baabda, Metn and Kesrouan accounted for nearly 54% of total real estate sales in the first seven months of 2015, against 47.3 % in 2007.
Housing prices and sales transactions in Lebanon should continue to decline in the coming months , according to local real estate experts.
The economy is expected to grow by a modest 2.5% this year , after the annual GDP growth rate of 2% in 2014, 2.5% in 2013 , 2.8 % in 2012 and 0.9% in 2011 , according to figures from the International monetary Fund (IMF).
Real estate sales continue to fall
The number of property sales in Lebanon fell 13.3 % y y -o to 15.774 units during the second quarter of 2015, according to Bank Audi . Similarly, the value of sales of goods fell by 19.2% to LBP2.97 billion ( US $ 1.96 billion ) in Q2 2015 the same period, according to the Real Estate Registry . Surprisingly, real estate investment by foreigners and other Arab nationals have increased, despite regional political unrest continues , soaring 31.6 % y -o y in Q2 2015 to 363 units, according to the Real Estate Register . In 2014 , foreign home buyers represent approximately 1.69 % of total real estate transactions for sale in Lebanon , down from 2.04 % in 2010 and 2.53% in 2009.
The greatest risk – falling rental yields
Gross rental yields in Beirut were down. Gross rental yields on apartments Beirut now range from 3.45% to 4.5%, sharply down from an average of 10% to 11% last about six years. Larger apartments in Beirut have lower yields.
The continued decline in rental yields can be attributed to the dramatic increase in house prices in recent years. In October 2013, average monthly rents in Beirut went from LBP3.14 million (US $ 2,082) for 150 sq. m. apartments LBP 8.12 million (US $ 5,380) for 400 sq. m. apartments, according to research from the Global Property Guide.
Average rents for the market as a whole are lowered by the survival of many pre-1992 contracts, creating a class of tenants paying low rents, which can not be expelled, except at great expense (see owner Lebanon and the rights of tenants).
However, this law does not affect the post-1992 contracts, which are equally balanced between landlord and tenant. (The search for the Global Property Guide only covers current offers sales and offers for rent, non pre-existing contracts).