“The major antagonistic questions on the lips of real estate observers today, especially investors, relate to the outlook on prices in the domestic market. When are prices going to resume their upward trend? Conversely, are discounts on asking prices going to increase further?” the report states.
It then offers a reply: “The answer is not anytime and not before the stock of unsold apartments is gone. And that would most likely be not before reaching a political settlement in neighboring Syria. For developers to get rid of their properties there would have to be a sufficient stream of sales in the market over a sustained period of time.”
There are no official statistics on the number of vacant apartments and buildings in Lebanon.
Bank Audi’s report says that the other condition necessary to push up the prices of properties is the return of Arab investors and Lebanese expatriates.
“And for that to happen, it would mostly likely take nonresidents to participate actively as well in the buys and add some volumes to the sales. Lebanese expatriates and also foreigners (mainly Arab investors) would have to make a move and be active in the market again,” the report states.
Luxury real estate developers openly complain that most of their projects in Downtown and other parts of the capital are on hold due to the absence of wealthy Arab investors and affluent Lebanese expatriates.
In the past real estate was considered as one of the most lucrative investments in Lebanon, but the tense situation in Syria as well as the drop in oil prices have discouraged wealthy Arab Gulf nationals from buying properties in the country.
“A regional/international political settlement to the war in Syria and a return to stability in the Near East region would allow nonresident Lebanese, Arab and international investors to think again of Lebanon in terms of property investments,” the Bank Audi report says.
The report adds that even if stability was restored to Syria and investors returned to Lebanon, the developers would still need to deal with the oversupply in properties.
“The large stock of properties for sale would take some time to disappear, and it is most likely only then that downward price pressure could fade away,” the report explains.
Bank Audi argues that it may be a good time for the Lebanese to buy properties while the prices are reasonable or even low, adding that if the market conditions improve in the future, the prices of these apartments could go up.
“Bargaining today and getting a good deal is a golden opportunity for buy-and-hold investors to ride the next wave of price increases way before it actually starts,” according to the report.
The report adds that developers are adapting more and more to restrained budgets and focusing on smaller units, with a flurry of apartments/studios below 150 square meters being built.
“Buyers are sacrificing the much-used-to large spaces to be able to afford a new home or at least to buy one not too far from their workplaces. This must have been a non-negligible factor behind the stagnation of new supply indicators,” the report says.
It notes that cement deliveries, a coincident indicator of supply, retreated by a yearly 1.6 percent in the first seven months of 2017.
“The total area of new construction permits slightly rose by 4 percent in this year’s first seven months after contracting by a small 0.9 percent in full-year 2016,” according to the Bank Audi report.
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