Lebanon: Overview

RENTAL YIELDS

Yields are moderate at 6.2% in central Beirut

Recent figures show that Beirut yields have dropped to 6.2% on the average from 10.2% by the end of 2004. Smaller apartments can get higher yields up to 7.46% for 150 sq. m. Yields can go as low as 5.21% for apartments of 500 sq. m. and bigger.

Apartments are priced at an average of US$1,690 per sq. m. Price increases as apartment size gets larger. A 500-sq. m. apartment can sell for around US$2,174 per sq. m.

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TAXES AND COSTS

Rental income tax is low in Lebanon

Rental Income: Income tax on rental income is progressive. For small amounts of income the tax is not high, at around 2% above a threshold of US$13,200 per annum. Deductions can amount to 30% of the gross proceeds.

Capital Gains: There are no capital gains taxes.

Inheritance: Inheritance taxes are levied at progressive rates from 3% to 33%.

Residents: The tax treatment of residents and non-residents is similar.

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BUYING GUIDE

Buying costs are moderate in Lebanon

Round-trip costs, i.e., the total costs of buying and selling a property, amount to around 11.57%. This includes the registration fee and transfer tax, each 5%. Some fees can be avoided, for instance, if a lawyer is not hired, and/or if the property is registered directly with the Land Registry, without going through a notary public.

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LANDLORD AND TENANT

Rental law is neutral in Lebanon, but courts are slow

Lebanese rental law is neutral between landlord & tenant.

Rent: Rents can be freely agreed between landlord and tenant for contracts signed after 23 July 1992.

Tenant Security: The tenant who signs a one-year contract has the right to hold on to the property for three consecutive years. Thereafter, the landlord is entitled to end the contract, or to renegotiate.

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ECONOMIC GROWTH

Lebanon is politically complex and unstable

Lebanon (pop 3.8 million; GDP per capita US$6,028) is one of the most complex and divided countries in the Middle East. To maintain the balance of power between religious groups, the president must be a Maronite Catholic Christian, the prime minister a Sunni Muslim, the deputy prime minister an Orthodox Christian and the speaker of parliament a Shi’a Muslim. The 128 parliamentary seats are equally divided between Christian and Muslims.

Lebanon’s economy and populace were heavily ravaged due to the Lebanese Civil War from 1975 to 1990. There was an uneasy calm between 1991 and 2006, with external forces and militant groups occupy different parts of the country. For instance. Syrian troops occupied the country until 2005 while Israel maintained a “security zone” until May 2000.

A new chapter was added to its history of conflict when fighting erupted between Israel and Hezbollah in Southern Lebanon in 2006. The attacks have caused large-scale damage in Beirut, undoing much of the good work done in the post-Civil War reconstruction programme.

There seems to be no end to Lebanon’s problems. The situation is intertwined with the over-all state of conflict in the Middle East. The refugee camp where Fatah al-Islam militants are supposedly hiding were put-up to house part of the 350,000 Palestinians displaced when Israel was created in 1948.

The reconstruction and rehabilitation of the ravages of Lebanon’s war were costly, resulting in a huge foreign debt, estimated to reach as much as 190% of Lebanon’s GDP. Unemployment is around 12-13%. GDP per capita fell by 4.4% in 2006 due to the conflict.