The Lebanese housing market seems to benefit from its Arab neighbours’ troubles. Despite the crisis engulfing Dubai and other GCC countries, Arab investors and wealthy Lebanese expatriates have been moving money into Lebanon’s property market.
It doesn’t hurt that Lebanon’s climate is great, the food wonderful, and Beirut society can be liberal – the heartland of pleasure and relaxation for the region.
In the second quarter of 2009, the average residential property price in the Beirut Central District (BCD) soared 40.7% to LBP8.85 million (US$6,000) per square metre from the same period last year, according to Ramco Real Estate Advisers and Bank Audi’s Research Department, or 37.4% after inflation.
Law No. 296 allows foreign ownership of real estate in Lebanon. Foreigners can acquire 3,000 square meters (sq. m.) of land, after which they must obtain a decree from the Council of Ministers.
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Rents have been rising during this period - but not as rapidly as prices. A 50 square metre (sq. m.) Beirut apartment which in December 2004 would have cost US$60,000, would now cost an amazing US$400,000, according to our research.
Prices of larger apartments have risen somewhat less. But all the same, the property price rises have been spectacular.
Beirut is now less attractive for property investment. Gross rental yields have fallen from over 11%, five years ago, to under 4% now. Yields on larger apartments are unattractive, at under 3%.
Beirut is a charming city. But it is not Monaco, not an island of stability. Due to Lebanon’s bad neighbours to the south, among other reasons, it suffers instability.
Consequently, purely from an investment perspective, it seems to us overpriced.
Capital Gains: There are no capital gains taxes.
Inheritance: Inheritance taxes are levied at progressive rates from 3% to 45%.
Residents: The tax treatment of residents and non-residents is similar.
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.
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 has been known for wars, turmoil and instability. The country’s economy and populace were heavily ravaged due to the Lebanese Civil War from 1975 to 1990. Between 1990s and early-2000s, there was an uneasy calm with external forces and militant groups occupy different parts of the country.
In 2005, former Prime Minister Rafig Hariri was assassinated. Then in July 2006, Israel-Hezbollah War erupted, which caused large-scale damage in Beirut, undoing much of the good work done in the post-Civil War reconstruction programme. In May 2007, the violent Nahr al-Bared conflict, considered the most severe internal fighting in almost two decades, exploded and ravaged some parts of the country.
Finally in May 2008, the Doha Accord marked the end of an 18-month long political crisis in the country. Local political and security conditions improved considerably, with the Lebanese government determined to pursue reforms focused on achieving economic revival, sustainable growth and political stability.
In 2008, the Lebanese economy grew by a spectacular 8.5%, the highest in 15 years, amid the global economic crisis. In 2009, real GDP growth rate was predicted to exceed 6%, up from an earlier projection of 3%, according to the Banque du Liban.
Inflation is expected to be around 2.5% in 2009, down from 10.8% in 2008, based on the latest forecast from the IMF.
In August 2009, the balance of payments (BOP) recorded a surplus equivalent to LBP1.53 trillion (US$1.02 billion), according to Banque du Liban. For the first 8 months of 2009, Lebanon accumulated a total BOP surplus of about LBP6.56 trillion (US$4.37 billion), more than doubled from LBP3.04 trillion (US$2.0 billion) in the same period last year.
The number of tourist arrivals has also been rising lately. In the first half of 2009, tourist arrivals surged 61% to 761,415 from 473,574 tourists in the same period last year, according to the Ministry of Tourism. In 2008, there were 1,332,551 tourists in the country, up from 1,017,072 tourists in 2007 and 1,062,635 tourists in 2006.
