The real estate sector in Lebanon remains a valuable investment in the medium and long term, according to a new report by Bank Audi. The study highlights that the real estate market in Lebanon has been under significant pressure since the onset of the crisis in 2019, with an overall contraction in demand. This is mainly due to the notable decrease in purchasing power among families, caused by the deterioration of the exchange rate, the lack of borrowing opportunities, and the imbalance between the cost of living and income levels.
Specifically, the number of real estate sales decreased by 22.4% during the first seven months of 2024 compared to the same period in 2019. At the same time, the demand for office space has seen the largest decline due to the crisis, as prices have recorded the most significant drop from their 2019 levels. Evidence of this is the large number of vacant office spaces, particularly in the capital.
On the supply side, the recession in the sector in Lebanon has worsened since the 2019 crisis and has deteriorated further recently with the outbreak of the war in Gaza and its spillover into southern Lebanon. The latest figures published by the Beirut Order of Engineers & Architects show a decrease of 9.9% in building permits during the first seven months of 2024 compared to the same period in 2019. Similarly, cement deliveries – an indicator of existing projects – decreased by 26.5% between 2019 and 2023, according to the latest statistics published by the Central Bank of Lebanon. Cement deliveries in 2023 amounted to approximately 2.35 million tons, compared to 3.2 million tons in 2019.
The report adds that despite the intensification of the conflict in the region since October 2023, the escalation of Israeli attacks against Lebanon, and the high level of uncertainty, real estate prices in Lebanon during 2024 have not experienced significant changes. While the high geopolitical risks have negatively affected the overall investment climate this year, the Lebanese real estate market has managed to maintain the price levels reached in the summer of 2023 – before the outbreak of the war. Thus, only about 10% of residential property owners who intended to sell have sold at reduced prices. The small number of sales agreements concluded this year indicates that sales prices were 50% lower than before October 2019. In fact, only sellers in dire need of cash offered their residential units at discounted prices.
Looking ahead, Bank Audi's report predicts that the real estate sector in Lebanon will continue to mirror the country's general economic and political conditions for the foreseeable future. These prospects remain subject to various potential scenarios at the political and economic levels, which will impact real estate prices and market conditions. Bank Audi's macroeconomic forecasts for the next twelve months revolve around three scenarios: a positive scenario with a 20% probability, a negative scenario with a 30% probability, and an intermediate scenario, which is the baseline scenario, with a 50% probability. If a positive political and economic scenario unfolds, demand will increase significantly, leading to a rise in real estate prices, supported by the return of housing loans. However, if the negative scenario materializes, demand will decrease, and more properties will be put up for sale, putting downward pressure on the real estate sector and prices in general. The intermediate scenario assumes the stability of the real estate market, with prices remaining steady.
The report concludes that, in the long term, real estate in Lebanon remains an undeniably valuable investment. This outlook will be further strengthened in the medium and long term if a scenario involving the end of the war and a political settlement comes to be. Real estate prices in Lebanon are still significantly lower than they were before the crisis, indicating a hidden opportunity and the possibility of significant gains if political, economic and security conditions stabilize. The slow growth in supply over the past five years and the emergence of a limited number of projects suggest the possibility of a rise in real estate prices if confidence is restored.
Specifically, the number of real estate sales decreased by 22.4% during the first seven months of 2024 compared to the same period in 2019. At the same time, the demand for office space has seen the largest decline due to the crisis, as prices have recorded the most significant drop from their 2019 levels. Evidence of this is the large number of vacant office spaces, particularly in the capital.
On the supply side, the recession in the sector in Lebanon has worsened since the 2019 crisis and has deteriorated further recently with the outbreak of the war in Gaza and its spillover into southern Lebanon. The latest figures published by the Beirut Order of Engineers & Architects show a decrease of 9.9% in building permits during the first seven months of 2024 compared to the same period in 2019. Similarly, cement deliveries – an indicator of existing projects – decreased by 26.5% between 2019 and 2023, according to the latest statistics published by the Central Bank of Lebanon. Cement deliveries in 2023 amounted to approximately 2.35 million tons, compared to 3.2 million tons in 2019.
The report adds that despite the intensification of the conflict in the region since October 2023, the escalation of Israeli attacks against Lebanon, and the high level of uncertainty, real estate prices in Lebanon during 2024 have not experienced significant changes. While the high geopolitical risks have negatively affected the overall investment climate this year, the Lebanese real estate market has managed to maintain the price levels reached in the summer of 2023 – before the outbreak of the war. Thus, only about 10% of residential property owners who intended to sell have sold at reduced prices. The small number of sales agreements concluded this year indicates that sales prices were 50% lower than before October 2019. In fact, only sellers in dire need of cash offered their residential units at discounted prices.
Looking ahead, Bank Audi's report predicts that the real estate sector in Lebanon will continue to mirror the country's general economic and political conditions for the foreseeable future. These prospects remain subject to various potential scenarios at the political and economic levels, which will impact real estate prices and market conditions. Bank Audi's macroeconomic forecasts for the next twelve months revolve around three scenarios: a positive scenario with a 20% probability, a negative scenario with a 30% probability, and an intermediate scenario, which is the baseline scenario, with a 50% probability. If a positive political and economic scenario unfolds, demand will increase significantly, leading to a rise in real estate prices, supported by the return of housing loans. However, if the negative scenario materializes, demand will decrease, and more properties will be put up for sale, putting downward pressure on the real estate sector and prices in general. The intermediate scenario assumes the stability of the real estate market, with prices remaining steady.
The report concludes that, in the long term, real estate in Lebanon remains an undeniably valuable investment. This outlook will be further strengthened in the medium and long term if a scenario involving the end of the war and a political settlement comes to be. Real estate prices in Lebanon are still significantly lower than they were before the crisis, indicating a hidden opportunity and the possibility of significant gains if political, economic and security conditions stabilize. The slow growth in supply over the past five years and the emergence of a limited number of projects suggest the possibility of a rise in real estate prices if confidence is restored.
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