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Correction in Property Market Activity Not in Prices

The property sector has slowed down in Lebanon in 2011, with a downward correction in activity and sales volumes, a report published by Lebanon Weekly Monitor, Bank Audi’s economic publication said.

 

Despite the important activity in the last quarter, the value of property sales dropped in full-year 2011 by 7% and the number of sales transactions contracted by 12% over the year.

 

 With sales to foreigners contracting by 20.3%, it looks like foreign demand, and more particularly Arab demand, is the one to have reported the most acute decline, notwithstanding the slowdown of demand from Lebanese non-residents, the report said.

 

 The correction in the market volumes is tied to a number of factors, namely the domestic political bickering and regional turmoil creating uncertainties for investors on one hand and the large base of property sales reached in the previous year after four consecutive years of double digit growth in the market.

 

It is yet important to mention that the correction in volumes is not being coupled with a correction in market prices. Property prices remained almost flat, with very minor changes (downward or upward depending on the region), according to the report.

 

“The resilience of the property prices is tied to a number of factors: The limited supply of land in a small area size countrywide, the lack of speculative demand with most past years’ demand being driven by end-user needs and the low leverage of developers that are not under significant pressure to ratify sales.”

 

The report went on to say: “All such factors support the argument that there is no real estate bubble in Lebanon but some correction in an overall cloudy regional environment. Still, the decline in property market demand this year lead to a slowdown in construction activity. Construction permits are down 6.7%, as developers turn into a wait and see attitude.”

 

It is worth mentioning that construction permits were growing at a CAGR of 19.3% over the previous four years. It looks like construction activity is likely to continue take a break awaiting for changing confidence signals in the political environment at large, it added.

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