The days that one would see groups of Syrian workers sitting on every street corner, drinking coffee and smoking cigarettes while waiting for a job, are long gone by. Since the assassination of former Prime Minister Rafic Hariri in 2005, Syrians have generally proven more reluctant to try their luck across the border, as many Lebanese blame Syria for the string of political killings that shook the country in recent years. It is estimated that following the murder of “Mr. Lebanon,” some 30 Syrians were killed in random attacks.
Meanwhile, Lebanon’s construction and real estate market is booming across the board. Nearly everywhere in Beirut, buildings are bought up, emptied and demolished to make way for yet another new apartment block. With less Syrian workers around while demand is soaring, labor cost has witnessed a significant increase in recent years.
According to a Lebanese contractor from eastern Beirut, who preferred not to be named, the salary of a Syrian laborer has risen by an average of some 33%. “Three years ago an unqualified worker was about LP15,000 ($10) a day,” he said. “Today he charges about LP20,000 ($13). A qualified worker, such as a carpenter, electrician or painter, costs some LP45,000 ($30) a day, up from $20 to $25 a day.”
According to him, there are several reasons for the price hike. “It’s more expensive for Syrians to take the bus to Lebanon and food has become more expensive, so it is only normal that they demand a wage increase,” he said, adding that, ”since March 14 there are simply less Syrians around. A few years ago, you could pick up a worker from the street even for $8, as many were desperate just to eat. Now, you are lucky to find anyone at all.”
Construction inflation
Personally, the contractor is not too affected by the lack in supply, as he has been working with more or less the same group from Aleppo for more than a decade. He warned that the cost of labor is neither the sole nor the main cause for the increase in construction costs. “Fuel, steel, lead, cables, everything has become more expensive,” he said.
Still, that has not stopped the Lebanese from building. According to figures released by the Order of Engineers of Beirut and Tripoli, the Lebanese authorities issued construction permits for a total of nearly 6.1 million square meters during the first seven months of 2008, an increase of 26.5% compared to the same period last year.
Even the clashes in May 2008 did not stop the builders from building, although the increase in construction activity that month was relatively smaller than in other months. Most permits issued (49.8%) concerned the Mount Lebanon region, followed by north Lebanon (16.5%), South Lebanon (15.9%), Beirut (12.1%) and the Bekaa (5.6%).
The increase in construction activities is to a large extent caused by a soaring demand for real estate. According to the Investment Development Authority of Lebanon (IDAL) over $4.3 billion worth of properties were sold in Lebanon in 2007 alone. Most buyers are Lebanese expatriates working in the Gulf, Europe and the US. According to most real estate brokers, the price of properties in Beirut and Mount Lebanon saw an average increase by some 40% over the past year.
Soaring real estate
“The price of medium and high end property in Beirut has increased by some 35% to 40% over the last four months alone,” estimated Raja Makarem of Ramco Real Estate Advisers. According to him, however, the price increase hike is not so much the result of a rise in construction cost, but by a surge in demand, some 90% of which stems from Lebanese expatriates.
Still, he expected a (minor) market correction to take place during the coming months, mainly due to the current instability in the world’s financial markets. “Over the last three years, the market grew by some 25% to 30% a year, while this year by up to 40%,” he said. “I think the market will go back to normal growth figures in the coming months.”
While the Lebanese banking and real estate sectors have so far not been tarred by the American subprime and financial market crises, Lebanese expatriates may adopt a wait-and-see attitude before investing. In addition, some may have been personally affected by the crash in international stock markets, while others may have lost their jobs due to the collapse of banking giants such as Lehman Bros.
“Although there is no crisis whatsoever, the recent craze for Lebanese real estate may be over, at least temporarily,” Makarem concluded.
