The demand for medium-to-small apartments in Beirut and its suburbs is on the rise. This is particularly true in the more affordable suburbs such as Yarze, Fanar and Dbayeh on the outskirts of town and the more central neighbour hoods of Ras El Nabaa and Barbour. The process of looking for a home of realistic size and amenities confirms the Lebanese proverb: “It’s not what you know, it’s who you know and how hard can you twist their arm.”
In this report, Executive takes the hypothetical example of a young, professional couple looking for a home to start their new family. Even for the well-to-do, finding a decent place to live in Beirut’s pricey market can be arduous; we assume our couple together brings in $6,000 a month — placing them in the top five percentile of household income earners — and then look at the options they have and the challenges they face.
Re sales
Our new buyers would do well to swallow their pride and consider opting for resale rather than for an apartment in a new development. When buying an old apartment (more than 20years old) in Gemmayze or Ashrafieh you can expect to pay $1,500 to $2,500 per square meter (sqm), according to Walid Moussa, chief executive officer of PBM brokers. By comparison, prices start at $4,100 per sqm for space in Byblos Real Estate Investment’s (BREI) upcoming Convivium VI building in Gemmayze.
However, should our couple be planning to shop around on the resale market, they should be aware of extra renovation costs: Antoine Abou Rizk, manager of Lebanon Real Estate, said that although a used 140 sqm apartment in Rmeil had an attractive asking price of$260,000, renovation alone could cost up to $350,000.
Location, location, location
New or old, location is everything when it comes to real estate prices. Go from Rmeil to Dekwani-MarRoukouz and a similar-sized unfurnished used apartment of 150 sqm drops to around $205,000, according to Plus Brokers‘ Michel Ghosn.
Badawi Group has 250 sqm apartments available in an upcoming housing project in Zouk Mikhael, five minutes from the highway to Beirut. Currently, the price stands at around$1,300 per square meter before rising 5 percent at the next construction stage, making it around $325,000 at base price. According to George Badawi, construction costs of around $525 per sqm (not including land price) are not as high as luxury developments being built in Beirut, but nonetheless owners will have amenities such as security, a garden, a swimming pool and underground parking.
Saving money by moving out of town has its drawbacks, of course. It means a lengthy commute for those working in Beirut and frequent wrangling with the city’s infamous gridlock. With gas costs rising, the drive to work might make a bigger dent in your savings than expected; transport should generally absorb 5 percent of your income, but in reality it’s much higher in Lebanon if you drive more than two hours each way to work, according to Mohammad Chamseddine of Information International.
Keep it small
Like Paris, London, New York and even Dubai, many couples or first-time home purchasers opt to live in studios, which are more and more prevalent in Beirut due to the increasing demand from the “eat, sleep, work” crowd who have very little time to spend at home.
If our couple fancy a pad in the city center, $350,000 will buy a 77-sqm apartment on the fifth floor of BREI ‘s Gemmayze Convivium VI.
However, if they want a bit more space to breathe, an FFA Real Estate project launching in Badaro in two months will include 80-sqm apartments with starting prices that hover around$2,900 per square meter ($232,000 for a first floor 80-sqm unit). Mireille Korab Abi Nasr, FFA Real Estate’s marketing and sales director, says the firm has received more than 120 inquiries from interested parties about these units.
Although small studios maybe cramped, they can provide a great way to afford a down payment on a bigger property. Jad Zgheib of JSK brokers suggests an initial investment in small apartments(as small as 40-sqm studios) as they are always in demand and can then be sold easily, especially around university areas. “You should expect a capital gain of 10 to 15 percent yearly,” he said.
To broker or not to broker
Zgheib says brokers can make all the difference by putting together special deals that cater to the particular circumstances of buyers and sellers: “I had a couple who had$180,000 to spend on a home but didn’t have the 20 percent cash down payment. At the same time, I knew a guy who had his eye on a home under construction in Metn that needed two years to finish. He decided to sell his existing current residence in Dbayeh to this couple and rent it from them for two years until his new home [was] finished. So the $600 monthly rent payments over this period substituted as the down payment.”
A broker can also typically help to negotiate the asking price down 10 percent if he has brought more than one buyer to a certain project. Zgheib said he got one of his clients to gather friends to buy three apartments in one building in Mazraat Yachook. They got a10 percent discount off the asking price and ended up paying $300,000 each instead of $330,000 for 200-sqm apartments that are a short distance from the Bekfaya highway.
Though negotiations typically top out at 10 percent, one can certainly give an extra tug if the building is old or if there is no parking assigned. However, the 2.5 percent brokers fee can be daunting to some. If you choose to go it alone you risk overlooking certain information that a broker may provide, but there are a handful of websites that can help you get in touch directly with the owners of property.
One such site, Aradeek.com, founded by Waleed Khoury, is updated daily and even allowed sellers to list their properties for free during the month of January. Now more than ever is the time to negotiate on housing prices, given the tumultuous political environment. But those buying small houses have less leverage, especially when buying from a developer who has not based his financing on bank loans and is not in a hurry to pay them back. Walid Moussa suggests buying off-plan, as it is often more negotiable.
Paying for it all
Information International’s Chamseddine says while 20 to 25 thousand Lebanese need home loans each year, but only 10,000 households receive them. Iskan and other publicly subsidized loans tend to offer customers better rates, though not everyone qualifies(maximum household income per month to apply is $3,333) and there is a cap on the loan amount, which was recently raised from $120,000 to $180,000.
Going the commercial route, and assuming our couple gets a loan that covers 80 percent financing and allows at least 20 years to pay back the loan and interest, they are looking at a home within the $350,000 to $400,000 range, depending on how much cash they have saved to pay the 20 percent down payment that is usually required. Most home loan interest rates start out near 3.75 percent and slowly increase, up to as high as 8 percent after the first year. That determines your monthly payment, which, as a rule of thumb, should not exceed a third of your income. Brokers say that most banks are now offering loans to purchase apartments under construction or in the planning stages by making deals with the developers to finish their projects within a certain time frame.
Antoine Chamoun, general manager of Bank of Beirut Invest, says that the bank has been involved in financing loans for off-plan homes for about a year and a half, and is working with seven developers to provide loans for those who want to purchase off-plan homes.
The $500,000 ceiling offered in Bank of Beirut’s “BDL loan” — a loan offered by commercial banks partly subsidized by the central bank — is for a primary residence that cannot be sold for seven years. Banque Libano-Francais tied up deals with Plus Properties to finance home loans for the upcoming Plus Towers in downtown and Fanar Residencein the Metn area, while CIBCO is developing 120 and 150 sqm apartments that fit our budget range of $350,000 in their upcoming Sky Tower in New Doha, Aramoun, with off-plan loans provided by Bank Audi and BLOM Bank.
Not only will our couple be paying less in total by going off-plan, the down payment is also spread over alonger period of time, instead of paid all at once.
Abou Rizk says one advantage of having a broker, especially if buying off-plan construction, is that he can make sure that when our couple pays the gradual installments every few months, the contractor has actually reached the agreed upon stages of construction, and they are not just paying to watch time pass.
