The real estate market in Lebanon was suffering from a slowdown in performance recently, due to political unrest and security on both the internal and regional level. In this context, the value of real estate sales has declined, reaching 6.7% in 2011, before it recorded a slight increase of 4% in the first third of 2012. This comes after a recorded average annual growth rate of 32% in the past five years, which was characterized by a real estate spree.

The residential real estate market is being affected by the regional and local developments since the beginning of 2011, and it is still constrained by high and stable levels of prices. This made the residential real estate far from the reach of an important category of the resident population, especially among the young.
However, the market is still largely supported by the requests coming from the citizens both residents and non-residents, which accounts for more than 90% of the total residential demand. Foreigners, particularly the Arab nationals, were practically out of the market during the past two years, according to a report released by a research at Bank Audi for the real estate sector in Lebanon.
As for the market for commercial real estate, it benefited from a strong demand over the past year which resulted in a high and stable cost of rentals to a certain extent in the capital Beirut.
The demand for important commercial spaces was strengthened due to the food and beverage industry which is witnessing a kind of vulnerability to fluctuations in the prevailing
conditions.
In this context also, office rental rates have remained generally stable.
As for the supply, the local market witnessed an increase in vacancy rates in new buildings, reflecting a slowdown in construction activity in general, which decreased the total area of newly granted building permits, and that affects the current as well as possible future construction projects. Also construction costs slowed down a bit this year after a moderate growth in 2010 and 2011.
Real estate prices have remained almost constant in general during the past one and a half years, despite that the conditions were not conducive to the movement towards real estate investment. And it has become known for a long time, that property prices in the domestic market follows a pattern known as 'stairs', that means that when property prices rise up in a corrective movement it returns to settle up to accommodate the dynamics of the market before continuing to rise again.
The reasons behind this development are normally due to the relatively non-speculative real demand in the market haunted by the nature of personal use, in addition to low borrowing leverage of households and contractors, as well as the scarcity of available land in general.
While the real estate market turned increasingly to bank financing over the past years to finance building projects on the one hand, and the purchase of real estate on the other hand, it is believed that the borrowing leverage in the real estate market is still relatively low at both the individual and institutional level. Therefore most families are asking for housing loans and that has began to grow in the past years, only to reach a total portfolio of $6 billion, that is no more than 4% of banking assets.

The state of stagnation existing in the sector has been lengthened, as the hypothesis of a more blurry atmosphere on the regional and local scenes does not necessarily lead to a remarkable decrease in prices, because the real estate market is not characterized by an important speculative nature, in addition to the lack of financial pressure on the contractors.
Also, in case the situation has improved on a regional and local level, we should not expect a significant pace to upward in prices due to the presence of a remarkable inventory of unsold properties. So, it seems that the stability phase of property prices may take root to a relatively longer time in general.

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