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A report highlighted that the Lebanese real estate sector has tapered off over the past few months following a period of strong activity in recent years that paved the way for an upward price trend from low bases in the middle of the past decade.

“The slowdown was evidenced by the decline in the property sales (17 percent drop year-on-year after a remarkable 24 percent annual growth over the past five years) and the stagnation in construction permits year-to-date”.

It said the decline came within the context of domestic political bickering and regional political-security unrest with adverse spillovers on Lebanon’s growth momentum in general and real estate investment in particular.

“But despite the relative correction in Lebanon’s market activity, real estate prices almost stood still, with no major fluctuations in the past year. Buyers are becoming pickier when it comes to purchasing property, and developers are not in a hurry to close a sales deal, while the scarcity of available land plots in a small country ensures land increasingly weighs on end-user prices,” the report said.

It added that residential prices in the Lebanese market are mostly inelastic to downward pressures; they go up, stabilize for a while and then ultimately go up again, but don’t really fall.

The report said that the residential demand rests on sound fundamentals.

Property demand mostly stems from end-user Lebanese nationals, of which residents steadily in need of lodging, and expatriates generally seeking a foothold in their country of origin, notwithstanding a high-end demand from Arab nationals. With a resident population growing at a long-term average rate of 1.6 percent, additional housing needs of residents alone are roughly estimated at close to 15,000 units per annum, notwithstanding non-resident demand, which accounts for around 40 percent of the total demand for property in Lebanon”.

The report added that non-residents have been somewhat less keen to make an immediate buy of late within the context of current uncertainties.

It stressed that residential demand is increasingly shifting towards smaller size lodging.

“With real estate prices sticky on the downside and with a growing gap between the purchasing power of residents and the price of the housing stock in the capital city, the market has been experiencing a shift to outside Beirut and to smaller flats in the past few years, the most in demand being those with a total size below 250 square meters per apartment. As a matter of fact, Beirut lost a 7 percent market share in Lebanon’s real estate sales value between 2006 and 2010, while immediate suburbs and mountains gained almost 5 percent over the same period”.

The report also stated that the retail landscape has been witnessing relatively steady demand across prime locations driven by resilient consumption patterns, thus maintaining occupancy rates at stable and relatively high levels.

On the other hand, the office market has been seeing less important demand than the retail counterpart, with few new office space projects coming to the market adding to a mostly old stock of office buildings. With Beirut prime locations’ total occupancy costs (including service charges and property taxes) holding up on the overall, and some GCC markets in a situation of oversupply and experiencing downward pressures on rents, the gap between top regional office zones and Beirut narrowed.

As for the outlook, the report said that the property market is likely to remain flat in the near term.

“The market is witnessing different conditions since last year, with locals and expatriates gradually digesting new price levels. Until the housing stock coming to the market and consisting of projects launched about three years ago gets gradually sold, and until lately launched projects consisting of smaller size flats find their way into the market, real estate prices are likely to remain at or near current levels,” it noted.

Citing an example, Audi said that the current average Beirut housing occupancy rates suggest there are some unsold properties waiting to be snatched up before demand pressures start to weigh a new on price metrics.

The report added that it is true that a price collapse risk is practically unlikely for Lebanon given the sticky-on-the-downside feature, but within the prevailing context, realty prices might find it hard to nudge up tangibly.

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