29-01-2022
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Lebanon economy has undergone major shifts since Oct 2019. Lebanon GDP plummeted from close to $52 billion in 2019 to $18 billion in 2021 (after 2020 correction). While Lebanon GDP is expected to grow in 2022 and further in 2023, expected public reforms are far from happening and a deal with IMF is still not sealed almost 3 years after the crisis.
The banking sector has been the major sector to be hit severely by the economic and monetary crisis. Banks have decreased their geographic presence across the Lebanese territories. Branches have closed or merged. Many expected large banks to merge and smaller ones to disappear – yet they all still seem to survive even though on an empty skeleton.
Tourism has taken a double hit since the crisis of 2019. Covid 19 has been a major hit on tourism worldwide and Lebanon did not survive that hit as well. The explosion on Aug 4, 2020 has indeed massacred the remaining faith of many players in the tourism industry in Lebanon – especially in the capital Beirut. Add to that, electricity issues has impacted largely the costs of maintaining business in tourism industry.
On a positive note, the worsened Lebanese currency has rendered the country less expensive for tourists though and hence summer 2022 was relatively the first good summer for tourism sector in Lebanon after major setbacks. Unlike banking sector, this sector has however witnessed withdrawals of major players in hotel, restaurant and entertainment over the past years and only few players remained operating at full scale.
The third major sector that was undoubtly affected is the real estate sector. Let's take a look at the 4 main characteristics that describe the Lebanese Real Estate market in 2022.
1- Checks are no more accepted. Only fresh $
While banking and tourism sector have been hit largely since oct 2019, the real estate market has witnessed excessive transactions in 2020 and 2021 as sellers were accepting check payments (mainly to close loans) and buyers were seeing real estate as safer haven for their money trapped in Lebanese banks.
In 2022, this is no longer the case. Transactions are happening largely based on what we know as fresh $ (that is hard cash $ or transfers to accounts outside Lebanon).
2- Prices are starting to budge upwards
If you look at real estate prices (in fresh $) post October 2019, one may safely assume that prices went down by 35% to 50%. Mind you, 2019 has been one of the toughest years to close real estate transactions as prices requested by sellers did not match the appetite of buyers and this price gap was reflected in the fewer transactions witnessed in that year.
Some highly requested areas (such as Faqra & Achrafieh Carre’ d’or) have been more resistant to price drops & hence have witnessed lower price % decrease.
It is safe to state that now is a good time to buy real estate in Lebanon. As a matter of fact, buyers should not wait much longer once they find their match property - as prices are starting to budge upward slightly. Believe it or not, we have witnessed a few examples of apartments sold in same building with a good 5% to 10% price increase between Q4 2021 and Q3 2022.
3- Full payment is expected. No more bank loans & definitely no “lease-to-own” options
Banks spent the last 2 years correcting their books and closing loans of their major clients. They are not lending money since October 2019.
In the absence of bank loans, sellers are selling only against full payments in fresh $. They are not willing at large to enter into “lease-to-own” solutions with buyers – especially with a weak juridical system and “official” exchange rate still at 1515.
Nowadays, if you want to buy real estate in Lebanon you have to have the full amount in fresh $.
4- It is a secondary market and it will be for a while. Almost no new developments for the past 3 years & I don’t foresee many developments in the near future.
Developers have suffered hugely from exhausting bank loans prior to 2019 and low sale transactions rate. Most of them are today debt free.
Those developers will find it hard to pledge their own capital into new developments. I see them in a “wait & see” mood. They may be waiting for the next wave but that wave is not today.
Today, if you want to buy real estate in Lebanon, it is from the secondary market or the last stock of debt-free units that developers may have kept till today.
Samar Hassan
General Manager
