The ripples of the Lebanese economic slowdown vary from sector to sector. Tourism was hit by the absence of hefty Gulf spenders but was able to adapt to the new segment of European tourists by offering small Bed and Breakfast experiences outside Beirut. The automobile sector suffered from low demand but also adjusted its offering to cater to buyers looking for a sleek look and a small price tag.
The general economic slowdown plaguing Lebanon since 2011 has hit the real estate sector hard. The wealthy Gulf investors for whom large units were destined pulled out of Lebanon after a series of travel bans and regional turmoil. Moreover, the wallets of the Lebanese were squeezed by the deteriorating economic conditions. These two factors led to a large stock of large units being unsold and to lower local demand. What little demand is left has been geared towards smaller units.
However, the adaptation is slower and harder to achieve in the real estate market. The stock of unsold apartments with no buyers in sight significantly impacts the cash flow of the developer and therefore future projects. The squeeze in cash-flow is significantly tough if the developer has upcoming payment dues to creditors or delivery dues to customers. The real estate market has been adapting with all new projects being smaller in size. However, we cannot expect a swift revival in demand as the decision to invest in real estate involves higher capital and longer commitment.
The halt of subsidized loans, which have now been reinstated, heavily weighed on demand in 2018. It is no surprise to see that construction permits reached their lowest level since at least 2014; 13,801 permits were issued in 2018, down by 16.4% compared to 2017. Real estate transactions also dropped by an annual 17.44% to reach 60,714 transactions in 2018.
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The Real Estate Market in 2018 Prolonged Stalemate