The Research Department at RAMCO sarl has been compiling data on the residential market in Beirut for several consecutive years: the number of residential projects being built, their total size (referred to as built-up area), their prices, their sales ratios, etc.
The evolution of this data over the last three years (2012 to 2014) reveals a sluggish demand, a decrease in the average apartment size and an increase in the unit price of unsold apartments.
The data collected is for residential buildings in Municipal Beirut completed at the end of each year between 2012 and 2014. Data was collected for projects that posted an asking price of around $3,000 per square meter (SQM) or above on the first floor, as projects within lower budgets tended to sell out off plan or relatively early in the construction process, and rarely offered reliable information on sales ratios.
Shrinking apartment sizes
The most striking finding is the drop in the average size of apartments completed between 2012 and 2014, with apartment sizes shrinking by 18 percent during this time. Apartments went from measuring 343 SQM on average in 2012 to just 283 SQM for projects completed in 2014. This is clearly reflected in an overall supply of built-up area (BUA) shrinking at a much faster pace than the total number of projects or apartments.
In parallel, the average size of apartments that were not sold in projects completed at the end of 2014 remains high. This means that larger apartments have the most difficulty in finding buyers.
In 2012 and 2013, the average size of apartments that remained unsold at the end of the year was smaller than the overall average size of apartments completed in those two years. In 2014, however, the average size of unsold apartments was about 10 percent larger than the overall average size of the total number of apartments completed during the same year.
The trend clearly points towards higher demand for smaller apartments in 2014. Smaller apartments sell faster than larger ones, which then remain on the market, dragging the curve of average sizes of unsold apartments up.
Shrinking Budgets
The average unit price of apartments that remained unsold in completed projects at the end of each year has also been rising slightly. Thus, in 2012, the average unit price of unsold apartments stood at $5,575 per SQM. It dropped to $5,351 per SQM in 2013. In 2014, the unit price went up again to $5,682 per SQM.
This information reinforces the trends found in the statistics on apartment sizes — data clearly shows that the more expensive apartments are those that are the most difficult to sell. Apartments that remained unsold after the projects were completed lie within a similar overall average budget, varying between $1.5 and $1.8 million per apartment across the three years.
Sluggish Demand
Overall sales ratios have dropped from 82 percent in 2012 to just 75 percent in 2014, indicating a clear slowdown in the market. The ratio of unsold apartments over the overall number of apartments has increased from 18 percent in 2012 to 22 percent in both 2013 and 2014. A higher portion of apartments completed in any given year thus remained unsold.
Demand is obviously low and the data confirms this trend. The information gathered is for apartments in projects completed within a single year. Apartments that were completed in previous years and still not sold are not accounted for in the table featured. However, these units were also on the market and thus the effective number of apartments that were offered for sale was in fact larger than the figures shown in the table.
Selective Demand
The figures do indeed tell a rather gloomy story. However, when put into proper perspective, they may not seem so worrisome. The political and security situations have been highly volatile — a vacant presidential seat, a divided government, a Parliament that meets only occasionally, violent militia fighting each other a stone’s throw away from the country’s borders and sometimes even within them. Within such a context, the performance of the residential real estate market is actually reassuring.
It should also be pointed out that these figures concern neighborhoods within the city limits of Municipal Beirut, where price increases over several consecutive years have forced a large chunk of the local clientele out of the market. Many buyers have been looking to other, more affordable suburban areas a few kilometers north or south of Beirut which continue to thrive.
Demand may thus have slowed down but it has not ceased to exist. Within Beirut, demand has shifted towards smaller budget spaces — well designed, clean, small apartments at more affordable prices, leading buyers outside the capital city in search of more affordable housing.
