[Dry Ice]

Multiple factors figure to let air of out Lebanese real estate
'The buyers will insist on lower prices'

By Osama Habib
Daily Star staff
Friday, October 31, 2008



BEIRUT: Economists and real-estate brokers predicted on Thursday a drop or at least a freeze in the prices of properties in Lebanon due to the global credit crunch, a fall in the prices of building materials and an expected reduction in remittances from Lebanese expatriates working in the Gulf Arab states.

"Naturally the prices of properties will either drop or stop growing. Apart from the economic situation in the Gulf states, the cost of building materials have fallen," Ghassan Diebah, a professor of economic and finance at the Lebanese American University, told The Daily Star.

Before the credit crunch in the United States and Europe, Lebanon saw huge demand for homes in Beirut and Mount Lebanon in the first six months of this year. According to the Investment Development Authority of Lebanon, more than $4.3 billion worth of properties were sold in Lebanon in 2007.

Prices of apartments in Beirut and some parts of Mount Lebanon rose by an average of 30 percent in the first seven months of this year.

In the Beirut neighborhood of Achrafieh, the price of a square meter of property in a building rose from $1,200 to more than $2,500 in the first seven months of this year.

In the Beirut Central District, better know as Solidere, the price of a square meter in a building is $6,000, compared to $3,500 a year ago.

Brokers said some prices have been set artificially by the developers on the grounds that the cost of building materials such as steel rose sharply.

"The actual cost of steel does not represent more than 7 percent of the total cost of a constructed building," explained Elie Harb, the general manager of Coldwell Banker in Lebanon. "Well then, what will the developers say now after the prices of steel fell in the international markets?"

He added that property sales have already started to fall.

"The overall retail sales of properties in Lebanon fell by 7.6 percent in August-September, and in Beirut alone it fell by a little more than 3 percent," Harb said.

Diebah pointed out that remittances from Lebanese expatriates might fall if a recession hits the oil-rich Gulf states.

"If this happens then the demand for apartments and land will fall in the future," he said.

He added that speculators have played a major role in driving up the prices of properties.

Another real-estate consultant said some developers would probably refuse to lower the prices of their properties, even if recession hits the Gulf states and Lebanon.

"Some of the developers will stick to their guns because they believe that the recession will end next year. But I can guarantee one thing: The buyers will insist on lower prices for the houses or lands that they hope to buy," the consultant said.

He admitted that his firm had not registered any sales in the past two weeks in Beirut.

Diebah said that there has been an illusion in Lebanon that developers can make quick and immense fortune from the sales of properties.

"There is an assumption that Lebanon is very small and because of that the demand will exceed the supply. This assumption is based on false hopes,' he said.

Credit Libanais said in a report on real estate in Lebanon that the demand for properties has risen significantly in the past two years.

But the report said that a significant percentage of the latest real-estate purchasing spree was done on a speculative basis, dragging real estate prices to unprecedented levels to an extent that many real estate properties were overpriced.

The report added that that the latest surge in demand drove prices up exorbitantly, making new residential apartments in Beirut unaffordable for middle-income Lebanese.