#1 TALA K | May 07, 2008

i think the S/m2 is far under estimated in this table, based on market research. it is between 2000 and 4500$ even 7000$ for some apts

#2 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#3 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#4 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#5 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#6 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#7 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#8 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#9 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#10 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#11 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.

#12 HANY HUSSEIN, CFA CHARTERHOLDER | September 03, 2010

24 months ago, CEOs of giant real estate players in UAE and Qatar kept saying that their own real estate markets were immune from what was happening at that time in US, UK , and Spain . It did not take more than two months and the real estate bubble in the region was burst. Among the key reasons that led to such bubble was the excess leverage from GCC banks, surge in land and building material prices, and delay in delivery.

Today, the same is happening in Lebanon. Banks are financing up to 80% and 90% of the units’ prices ARE WE SURE ABOUT THIS FIGURE? Also they offer relatively lower interest rate compared to their peers in the region benefiting from their historical low loans to deposits ratio. While this ratio has always been above the 100% in UAE, it was – until recently – in the range of 50% in Lebanon . Although the cost of building materials is not as high as 2008 levels, developers in Lebanon target 100% profit margin which increases the price of the units and gives an false indication that prices are increasing because of real demand. BUT SURELY IF PEOPLE ARE BUYING THEN THAT IS WHAT THE MARKET IS PREPARED TP PAY NON? Similarly, land owners started to either stop selling or ask for higher prices. Both had the same effect on prices as prices kept going up without real demand. SO YOU ARE SAYING THAT NO ONE IS BUYING?

On top of that, owners of existing old properties started to value their properties higher without having real reference index or comparable transactions. Furthermore, Lebanese government did not intervene to organize the market. Unlike UAE, the market in Lebanon is not well covered by research analysts. There is no reliable source of information that shows the real figures of supply and demand and what is the fair equilibrium price.

Many financial analysts tried to do their own research on the Lebanese market in order to assess how big is the demand. Real estate brokers and developers gave subjective opinions such as “We don’t have enough land�, “ Unlike UAE & Egypt, Lebanon is small� , “Arabs in general and Saudis in particular prefer to buy in Lebanon even if the prices are higher than the average in the region� , and “Millions of Lebanese abroad wish to buy their dream home in Lebanon and there is not enough supply for them�. Unfortunately all these are personal opinions from brokers and developers wishing to boost their business.

what were the key drivers behind that bubble?
- Lebanese working in the Arab Gulf had good savings during the period of 2003-2008 due to the higher crude oil prices. Many of them returned back to Lebanon during 2008 and bought homes to settle down.
- Suported by Iran , Hezbollah paid millions of dollars to Lebanese who were living in Al Dahiya and South of Lebanon to rent or buy new homes. HAS THIS REALLY BE THAT BIG A FACTOR IN THE CURRENT HOUSING BOOM?
- The end of 2006 war gave some comfort to Arab investors to invest in the Lebanese real estate market. This helped the market to stand well against the global real estate collapse?
- Many Palestinians, who were living in Nahr El Bared Camp, moved out buying or renting units. IS THIS A GENUINE FACTOR?
- Lebanese government officials have been optimistic and bullish on the real estate market which gives trust to investors. The government support includes low interest rate and lax bank rules in giving mortgage loans. It worth mentioning that, the IMF in its recent report in June 2010 mentioned Lebanese real estate market could be a potential concern if property prices and credit availability continue to rise further. This indicates that current prices have reached the peak and banks should reduce giving mortgage loans. Accordingly in best case, property prices in Lebanon would be stable while base and worst cases – which are not unlikely – would drop in the short and medium terms. WHAT WOULD BE THE CONSEQUENCES OF THE LATTER SCENARIO? WOUD WE EVER ENTER A PHASE WHERE BORROWERS HAVE NEGATIVE EQUITY?


Why is it a bubble?
Let us go back to basics and fundamentals. For the following reasons, I believe the real estate market in Lebanon is a bubble about to burst losing 15 -20% over the next 3 years:

1- Lebanon is far from political stability. The opposite is true. Couple of weeks ago, the Lebanese army opened the fire against Israeli when they crossed the boarders. While many expect a war in the Middle East , such clashes could turn investors off. MANY WOULD ARGUE THAT PROPERTY WAS UNAFFECTED EVEN DURING THR WORST DAYS OF THE CIVIL WAR. WHAT WOULD YOU SAY TO SUCH CLAIMS?
2- Lebanon in general and Beirut in particular lack the basic infrastructure. There is no enough electricity and water. Some areas like the Mountains don’t get electricity for more than 12 hours a day. Beirut does not get it for 3 hours a day. It is even worse in summer time, this can go up to 10 hours a day. Other real estate markets – within the region- like Qatar , Dubai , or even Cairo have more superior infrastructure. THIS WOULD NOT PUT OFF LOCAL BUYERS WHILE GULF INVESTORS WILL BY AND LARGE BE BUYING PROPERTIES WITHIN INBUILD BACK-UP FEATURES
3- Although few investment banks and rating agencies have recently upgraded the Lebanese public debt, public debt to GDP as of 2009 is cc 150%. This is among the highest in the world and is a real concern for any investor. Such high ratio could trigger – similar to what happened in Greece - a harsh cost cutting measures which certainly would affect employment and the attractiveness of the real estate sector. CAN YOU ELABORATE UPON THIS? THE CENTRAL BANKING IS PREDICTING 6% GROWTH WITH HEALTHY FOREIGN CURRENCY RESERVES
4- Property prices have shot up almost 5 times throughout Lebanon over the past 4 years. The price of 120 Sqm apartment in a poor area like Al Malaab El Baladi has increased from USD 30,000 to cc USD 160,000. Compared to Dubai , which provides investors with much better living style, infrastructure, and access to the business community in the Arab Gulf, Lebanon is considered expensive. A 150 Sqm beach-front apartment in Ramelt Al Bida or Roucha Beirut cost cc USD 1.3 million, while the same beach front apartment in Palm Jumerah is offered at USD 800,000.
5- Finally, ideally to assess how fair the real estate prices in Lebanon are is through using a valuation model. Unlike UAE, the average GDP per capita in Lebanon is as low as USD 10,000. Due to their relative lower income, Lebanese tenants can not afford paying high rents to make such prices feasible over the long term. For example, the average rent for a 250Sqm apartment in Achrafiah with current price of USD 700,000 is USD 2,500 per month or 30,000 per anum. This means 4.2% yield on investment (without considering the maintenance cost, vacancy rate, and transaction fees). Similarly, rent for a 250 Sqm beach- front apartment in Al Roucha can be in the range of USD 4,000 per month which means a yield of 3.7% p.a. Accordingly, investors would be better off to deposit their money into banks for a guaranteed deposit rate of 2-3% and don’t expose themselves to the risk of losing their principal in the real estate market. These naive calculations suggest that current prices in Lebanon have to ease down to become feasible for investors to buy again. YOU ARE ASSUMING THAT PEOPLE ARE BUYING TO LET. I SUSPECT THAT MANY ARE BUYING HOMES AND THAT ANY INVESTMENT IS AT THE DRAWING BOARD STAGE AND WILL BE FLIPPED FOR A DECENT PROFIT AS SOON AS THE DEVELOPMENT IS FINISHED.