Israel’s long-prepared revenge strike against their arch-enemy Hezbollah under a pretext of securing the return of their internally displaced population to the northern holy land, long ago a peaceful area of coexistence of different Semite peoples, has violently intruded on Lebanon – and displaced multitudes – at a time when the country was emerging into new, people-led efforts of recouping the quality and dignity of life that had been eroded by the multi-tiered crises of 2019 to 2023. One aspect of this fervently thought recovery was the resurrection of the urban spaces and affordable housing. Here is what Executive learned about the prospects and developments in those livelihood markets just before the country was assaulted with the anti-peace, genocidal stamp of approval by Israel’s international supply chain of advanced weapons of “precision” destruction and indiscriminate death.
Lebanon’s real estate and development sector has faced dramatic fluctuations, mirroring the country’s political, economic, and regional experience. From the boom periods that saw Beirut’s skyline transformed by luxury towers (a first post-conflict one in the 1990s, a distinctly different one from the mid-2000s up until 2011), to the deep troughs caused by global economic shifts and regional disunity in the 2010s, the ebb and flow of the market became exceedingly volatile in the late 2010s. Pockets of opportunity arose amidst stagnation. Starting with 2019, the property scene became even more complex, due to currency collapse and mass waves of both in and out migration.
And at time of this writing, the country is cursed with an intrusion of violence and war after a year of expanding conflict. While it is neither viable nor in the least predictable how the war economy will change the property market and real estate development sector in Lebanon, a wistful assessment of the nuanced forces that were shaping Lebanon’s real estate landscape in absence of enemy intrusions can still be obtained by looking at investor sentiment, currency shifts, and government policy in the first eight months of 2024.
Beirut’s downtown, once a center of commercial activity, entered the year with an overburden of obstacles to its economic vitality. “Downtown and all of Lebanon are oppressed. Those responsible have been busy for many years with political disputes and have not developed a new vision for the real estate market or urban planning,” says Walid Moussa, head of the syndicate of real estate brokers and consultants.
In the opinion of George Nour, founder and managing director of property consultancy Estate Solutions, the country’s political climate has indeed hindered development of high-profile areas in the urban core of Beirut, impacting both the capital and the nation. “We were facing a stagnation situation in the real estate market even before the crisis in 2019,” Nour tells Executive. He points to two primary factors contributing to this long-standing stagnation: the chaotic urban development in Lebanon and the precarious financial situation.
Despite these challenges, the real estate professionals point to signs of potential change in both the commercial and residential markets with the emergence of new businesses and the recent reopening of housing loan applications, which signal a returning access to the financing of property purchases and development. This change may encourage both homeownership and new construction projects, potentially contributing to urban renewal in certain areas.
Going by the evidence of numbers
The real estate market in Lebanon has experienced a significant decline, with transaction numbers plummeting by 84.96 percent in 2023 compared to the previous year. Only 11,639 real estate purchase and sale transactions were recorded last year, versus 77,380 in 2022. However, these figures are not quite as devastating as they appear to be, mainly because public sector strikes led to the closure of the General Directorate of Land Registry and Cadastre, which caused a delay in registration of real estate transactions. Some of this backlog seemed to get addressed in the current year. However, the 16,390 real estate transactions registered in the first six months of 2024 according to the Ministry of Finance, was a number still significantly lower than the 39,921 transactions from the same period in 2022. Rather than bureaucratic bottlenecks, the waning of buyer interest in recent months was driven externally. “The summer of 2024 was particularly challenging, marked by fear and uncertainty. This atmosphere of instability significantly dampened investor enthusiasm for purchasing property,” Moussa emphasizes.
This downturn in the real estate sector is symptomatic of the broader challenges facing Lebanon’s economy. The country’s ongoing political crisis—the ongoing and escalating Israeli-Hezbollah conflict, delayed government formation, presidential vacuum, interim rulings, and public utility strikes—has greatly affected confidence in the real estate market. In particular, the ongoing war in southern Lebanon, now expanding into Beirut and beyond, creates an increasingly hostile security environment that discourages investments, especially in high-profile real estate projects.
Furthermore, although the real estate market has had periods of growth since the 2019 financial crisis, the protracted economic struggle still negatively impacts purchasing power, while housing loans are still edging back into the market. “Development for sale does not exist today because developers do not have the capital to build; [also] the buyer does not have enough money to buy, which indicates that financing is suspended from all sides,” says Moussa. In addition, “closing the doors of their loans and financing prevents [people] from obtaining prior approvals to develop their investments or buy an apartment.”
The inconsistent availability of real estate registration services, with the closure of real estate departments in Mount Lebanon and the intermittent opening of others, creates a bottleneck for potential buyers and sellers in the property market. This uncertainty prompts concerns about the security of property transactions and the ability to transfer ownership. “How can people confidently purchase a property if they cannot even register it or transfer ownership?” Moussa points out.
Urban development’s broken backbone
Lebanon’s urban development has long been characterized by a lack of comprehensive national planning. According to a 2018 UN-Habitat report, only 14 percent of Lebanese territory was covered by urban plans, leading to uncontrolled construction in some areas and underdevelopment in others. According to property consultant Nour, “all developers without any market survey, market research, nor market analysis, were jumping into doing new projects just because they saw that real estate in that time is the favorable business.”
According to him, the precarious state of Lebanon’s financial institutions is the second major hurdle for the real estate market. “The financial institutions were always ready to finance as much as the developer wanted in terms of providing cash, and also the buyer at that time had the chance to borrow from the bank,” Nour explains. This easy access to credit fueled a boom in real estate development, with Lebanon’s construction sector contributing significantly to the country’s GDP – reaching 13.1 percent in 2018, according to the World Bank. However, this growth came at a cost.
“The market was interactive, yet insufficient because at that time the banks were not really looking at how the developers were spending the money. There was no compliance, no anti-money laundering control, and nobody was asking about ‘know your client’,” claims Nour. A lack of due diligence and oversight created a perilous environment where financial risks could accumulate unchecked.
The absence of robust regulatory controls is particularly concerning given the scale of lending to the real estate sector. As of 2019, before the onset of the current crisis, real estate loans accounted for approximately 36 percent of total loans in Lebanon, as reported by the Association of Banks in Lebanon. This high concentration of lending in a single sector, combined with lax oversight, left the banking system vulnerable to shocks in the real estate market.
Rotten roots
Nassib Ghobril, the chief economist at Byblos Bank Group, tells Executive that “even before the crisis, there were significant issues with the investment climate and business environment in Lebanon,” echoing Nour’s sentiment that problems have been brewing for some time.
The severity of these issues was already before the financial crisis of 2019 underscored by the country’s dismal rankings on the quality of its business environment. Ghobril adds, “According to the last business environment index issued by the World Bank in 2018, it was found that 75 percent of the world’s countries and 65 percent of Arab countries have a better business environment than Lebanon.”
The Lebanese economy has been hindered by the absence of comprehensive reforms, a lack of action that has damaged investor confidence and economic stability. The shortage of reliable economic data has long been a stumbling block for Lebanon’s economic progress. This persistent issue has made it challenging to accurately gauge the country’s economic health and has deterred potential investors from making informed decisions. Ghobril says that “more data” is needed, and notes that “the recent Fitch Ratings update and S&P report highlight the continuing struggle with data availability and transparency, issues that have long affected Lebanon’s standing with international rating agencies.”
Commercial comebacks and residential roadblocks
While new real estate development projects in downtown Beirut have been at a standstill, the area is experiencing a surprising surge in commercial activity. “There are no new real estate projects in downtown this year,” says Moussa, “however, we’re observing a lot of commercial movement and increased pressure in commercial real estate.” The prices, as Moussa indicates, are approaching levels seen before the crisis.
A cornerstone of this commercial resurgence is the reopening of Beirut Souks, a key shopping center in downtown Beirut, which announced on a June 26th Instagram post that more than 100 stores will soon be open, including Nike, Zara, Bershka, Stradivarius, Virgin, Etam, L’Occitane en Provence, Mouftah El Chark, among others. “The Azadea Group, a leading lifestyle regional retail company that owns some of the brands, will take off in Beirut Souks at the end of this year,” knows Moussa.
Beirut Souks, managed by Solidere, first opened in 2009 after a 10-year delay and $100 million expenditure. The massive complex, which sits on the site of Beirut’s original traditional souks, has been plagued by the same series of unfortunate events over the past years, including the 2019 economic crisis, the Covid pandemic, and the port explosion, which heavily damaged its stores and led it to fall into disarray.
Outside of the luxury retail niche and the commercial sector, the residential real estate market tells a different story. “The real estate sector is still in intensive care, in the absence of financial funding for real estate projects, which is the main nerve for developing the sector. While the majority of projects that are being implemented are self-financed to meet a personal need,” says Nour.
Despite these challenges, demand for real estate persists, particularly in Greater Beirut and coastal areas. Nour points out, “To meet the needs of natural population growth (Lebanese only), we must have an annual increase of 4 percent in residential apartments.” This demand has been further intensified by the displacement of over 100,000 citizens from southern Lebanon due to the ongoing Israel-Hezbollah conflict, leading to increased rental prices in some areas.
In the residential segment, rentals dominate the market as many Lebanese struggle to afford property purchases. Commercial real estate also sees merchants favoring rental arrangements over property ownership. Nour explains, “The merchant prefers to rent instead of buying because he considers the rent as part of the operating cost that provides him with the return on the sale.” This flexibility allows businesses to adapt quickly to changing market conditions.
Price trends vary across regions, with apartments in areas like Baabda, Hazmieh, and Beirut’s suburbs ranging from $150,000 to $300,000. Investor expectations have adjusted, with acceptable profit margins now around 6 percent, a significant drop from pre-crisis levels.
Expatriates and foreign citizens are finding opportunities in the current market. Nour observes, “Expatriates have a good opportunity to buy real estate, especially those who have cash, as they can buy real estate at reduced prices.” In the land market, sellers are often motivated by immediate financial needs and buyers looking to convert cash into tangible assets.
Unsettled ground
While the health of Lebanon’s real estate market has not always mimicked larger economic trends in the country, developers and stakeholders are now besieged with the upheaval of war. The country is in many ways, shaken and turned on its head, with large segments of the population displaced from the south, the Bekaa, and Beirut, and pushed into Mount, Lebanon, Metn, Kesserwan, and elsewhere. In the short term, stagnation or contraction in the market can be expected, with recovery dependent on broader political and security improvements.
