Lebanon is still sound place for investments despite the gloomy economic outlook around the world as a result of the global economic recession. This is one of the views echoed by a leading Arab investor who attended a conference on real estates in Lebanon last month. There is a growing agreement among many western and Arab financial analysts that Lebanon is one of the countries that managed to take full advantages of the crisis in the US and Europe. Properties in Lebanon and especially in Beirut are still seen as lucrative investments even in dark days.
“Let’s face it. Real estate developers and land owners are not willing to reduce the prices of properties for a simple reason: they don’t make lands anymore. So a smart investor would be better off buying a property in any location in Beirut and in few years has investments would worth ten times more,” one real estate broker told BUSINESS LIFE Magazine.
Some real estate developers have frozen large projects such as hotels and sea resorts in Lebanon until the crisis in the gulf region is over.
“This does not mean that the developers have abandoned Lebanon. They are only waiting until they receive more cash from their own countries before proceeding with the multi billion project,” one developer said.
He added that Lebanon’s real estate sector has once again miraculously escaped the fallout of the global financial crisis which did not even spare the emirate of Dubai.
Mounir Douaidy, General Manager of the giant real estate development company Solidere, said that the real estate sector in Lebanon was unaffected by the crisis because the demand in general was confined to local buyers and sellers before and after the crisis “I think that the real estate prices in Lebanon will not fall because it is not relying on demand by foreigners but mainly on domestic demand and the demand of expatriates who are willing to come back to the country,” said Douaidy.
According to statistics released by the Investment Development Authority of Lebanon, more than $4.1 billion worth of properties were sold in Lebanon in 2007.
The rush for properties up to June to 2008 has prompted developers to raise prices of apartments and lands in Beirut by more than 40 percent.
Douaidy added that there is more demand than supply on lands in Lebanon although lands in the country is very scarce, predicting a rise in the prices if the trend continued in the future. “This is the difference between Lebanon and the Gulf region,” he said.
Douaidy added that real estate prices went down by 50 percent in the region but remained the same in Lebanon and are expected to go up in the near future. “The general trend in Lebanon is not downward. Therefore, developers are the ones who will have to decide if they want to increase or decrease the prices of their projects,” he said.
The number of real-estate sales operations in Lebanon in the first five months of 2008 rose by 19.4 percent compared to the same period of 2007, according to the figures released by the Directorate of Real Estate at the Finance Ministry. The ministry added that the number of property transactions went down by 3.1 percent in the reported period to reach 60,800 transactions, while the number of sales operations saw an increase of 19.4 percent to reach 28,048 operations.
This was coupled with a significant rise in property taxes receipts of 55.2 percent to reach LL204.7 billion.
The ministry said in a statement the value of properties sold in Lebanon over the past five months of this year rose by 72 percent to reach $1.993 billion.
Bank Audi said that the increase in the number of sales operations was in line with the surge in real-estate demand.
“One driver for investment in real estate in Lebanon has been the fall in interest rates on the Lebanese pound and the US dollar,” the report said. It added that although property prices have been on an upward path in Lebanon, this rise has been at a slower pace than the global and regional increases in real-estate prices, thereby leading to a further interest in Lebanon’s real-estate sector.
The majority of collected property taxes in the first five months of 2008 were in Beirut with 30.3 percent of the total amount. This figure was followed by Baabda with 22.2 percent, Metn with 19.1 percent, Keserouan with 11.0 percent, the North with 7.1 percent, the South with 5.5 percent, and the Bekaa Valley with 4.0 percent.
It is worth noting that Central Bank governor Riad Salameh warned recently he may ask borrowers and investors to put down 40 percent of the total of any approved property loan to prevent a future real estate bubble in Lebanon
However, the real estate sector in the Gulf especially Dubai, he added, has been hit by falling property prices, and developers have slowed or canceled projects, according to another analyst.
Douaidy said that “There is no doubt that Solidere’s share, in spite of the share drop... its value is secure and it will definitely bounce back in the coming period to reflect the real value of assets.” Douaidy added: “We have no liquidity problems, we have no debt problems, we have very sound portfolio of sound receivables. We have a solid balance sheet.”
Solidere reported 2008 first-half net profit of $83 million, a 37 percent rise, and has said it expected its full-year profit to surpass 2007’s $156 million.
But this picture in the Gulf region in general and Dubai in particular was totally different.
Fadi Mousalli, Regional Director of Jones Lang LaSalle in Dubai, described the economic situation in the world following the global financial crisis as the survival of the fittest, taking this quote from Darwin’s Origin of Species book.
Mousalli said that 20 percent of the sectors in Dubai are directly linked to the real estate sector which was greatly hit by the financial crisis. He brought up a study by Morgan Stanley predicting a 10 percent decrease in real estate prices in Dubai in 2010. “Real estate is a major contributor to Dubai’s GDP that’s why it is more affected than other countries such as Qatar and Bahrain, which are suffering less because they are not as much involved in mega projects as Dubai,” added Mousalli.
Mounir Haidar, CEO of Sorouh real estate company, stressed on the need for development in infrastructure, services, educations and other sectors even in the light of the crisis. “We don’t want that this crisis to put an end to development,” he said. He gave the example of Abu Dhabi, saying that its government has decided that there should be a slowdown in developing some projects but none of them have been cancelled. “The government is eager to implement its plans even though the crisis affected some companies,” he added.
Haidar stated that the rapid growth is one of the reasons behind the crisis, adding it is normal to have 8 to 12 percent profit and not more. “As CEO’s we should not think of these provisions as sustainable because they are not,” he said.
Ahmad Mattar, Secretary General of the Arab Union for Real estate Development, said his organization will be set up soon to take united decisions on any project executed in the Arab world. The organization will comprises real estate companies, experts, brokers, lawyers, media persons and engineers to make sure that all aspects of the real estate sector are available. He said that the aim of this organization is to provide decent housing for the Arab population which is getting bigger each year.
