Arabian Business is raising the alarm — investors need to be wary of their investments in Lebanese real estate:
“In Beirut there is a real estate bubble… I think the real estate prices are lofty,” Paolo Moscovici, managing director of JP Morgan private bank in the Middle East, told Arabian Business in an interview published this week. “It is too much too fast,” he said, adding that investors in the Lebanese capital needed to be “cautious”.
And according to Nick MacLean, managing director of global real estate consultancy CB Richard Ellis:
“As a result of the difficulties seen in the GCC there has been an artificial flow of money into Lebanon and therefore prices have been inflated.
“The economy is interesting but perhaps doesn’t justify the quantity of money that has flown into that market place,” he said.
[…]
“The issue is not that a bubble will burst in terms of pricing, but that once there is a recovery seen in the GCC quite a lot of that money will flow out again,” he predicted.
Personally, when a three-bedroom apartment that was selling for $65,000 in 2006 is now priced at $225,000, you’ve got to be wondeirng what is really going on.
Arabian Business: The Beirut property bubble and the rise in rental and sales prices has resulted in the Lebanese capital securing the dubious title of the most expensive city in the Middle East.
But wouldn’t a bubble be the result of investment and speculation. I mean the reason the prices are so high in Lebanon is because demand is so high for apartments to live in. People are getting married and moving out of their parents homes and they need homes.. And Beirut is just 27 sqkm… And Lebanon killo is just 10,453 sqkm, with 4 million residents and 20 million expats all seeking accommodation…
Hence most of the buying is because people want to live in the houses, not just invest in their price until it soars…
Sigh, I think I’ll rent forever cause I’ll never afford an apartment!!!!!
But how certain are we that the homes purchased will be used as primary homes? You say that there is no speculation or investments in real estate in Lebanon while other swear to the opposite. There is not enough data to determine who the end-users are. That alone should be enough reason to be wary.
Living in Dubai, I heard it all before the crash: Dubai’s population is growing by 10% annually; we will continue to have a shortage of housing from now (2005) to 2014; the sky’s the limit; build and they will come. Well they did come and then they left.
I agree, you cannot tell if you’re in a bubble or not. There are always reasons that justify a bubble (or else there would be no bubble), and we heard those reasons in other bubbly markets too.
Intuitively prices do seem out of line with fundamentals, but we lack data and Lebanon is such a non-typical economy, I cannot really tell. Regardless, I don’t want to lock a significant part of my net worth in an unstable country; it makes more sense to just rent and invest the money elsewhere and thus avoid the political and market risk altogether.
Well put. Would love to own a house in Lebanon? Sure. But there are too many uncertainties and red flags for me to ignore. Will there be electricity to power my house 10 years from now? As it stands today, unlikely. As an investment, it should be liquid enough to sell at anytime. Can I be assured that the real estate market will remain liquid? With an uncertain political outlook, no, not really.
I agree – for the time being, rent seems to be the most appropriate option.
I think making the comparison between Beirut and Dubai is a mistake, nevertheless, property prices in Beirut are not much higher than those that are currently prevalent in Abu Dhabi or Dubai or Doha. And while the “too much too fast” argument holds true, I think this rapid rise has occured to bring up the property prices to their “real” values. The rise in real estate prices has slowed down now.
The final paragraph in the article quotes Bank Audi’s report on the issue, but fails to mention the conclusion made in that report – there is no real estate bubble in Lebanon. The demand is real, especially for mid-range apartments (usually purchased by Lebanese expats) who are buying them not as a speculative investment. The speculation may be taking place but only with a handful of deep pockets who are willing to take the risk on a country with a political environment as volatile as ours.
I think to fully understand the situation, the Government (or banks) need to detail the percentage of purchases for first homes or otherwise. My understanding is that the vast majority of these real estate transactions are for first homes in Lebanon (for both Lebanese and GCC Arabs).
I understand your view and I agree that further information is required to better assess the situation. But are the current prices really sustainable? I’m just curious — with all these residential towers springing up, has anyone checked to see if Lebanon has the electricity and water needed to service these buildings? Would people be willing to spend loads of money when the availability of utilities is uncertain? With these prices, I’m guessing they don’t really care.
I dont think they’re sustainable, but that is not due to overpricing. I think there is a political bubble that will definitely burst and destroy everything in its path, which is another topic altogether.
As for electricity and water, these projects/buildings are not relying on Public utilities – they all have private generators.
The fact that the real estate transactions have risen by more than 25% in the past year, in itself says something about peoples willingness to spends loads of money.
One thing that has not been mentioned by the press, is the development in all of Lebanon that is being driven by Beirut’s high prices.
Personally, I want to buy a house in the Bekaa; quieter, better weather, MUCH MUCH cheaper, closer to nature, and less than an hour away from Beirut or Damascus.