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Civil Protests Impact on the Real Estate Market in Lebanon - Oct. 2019

The ruling government, was shocked last week by extensive civil demonstrations, leading to new government regulations which will help the real estate sector.

Lebanese president General Michel Aoun was elected in Oct. 2016, the government was trembling in political stagnation, the real estate sector was hammered by a sever investment shortage and sales reduction, and the ‘Housing Loans’ restrictions added to the decline in the purchasing power.

Followed by October 2019 peaceful civil demonstrations across the country the government released new reforms, the real estate market is expected to reflect a positive disposition that will drive the building industry into a new era.

The sector has new challenges in attracting Lebanese expats and non-citizens to invest in the outcome of the proposed Mackenzie plan and the Cedre’s $11 Billion financings for infrastructure. The government is challenged in implementing the provisions of these reforms at the national level in an effective manner. The new political status will enable the current majority of the council of ministers to take decisions without any impact from the political dispute in the country.

A New Momentum

Such an act of massive civil protests, and the freedom of speech next to none in the region, we expect a new uptrend in the real estate sector reflecting the freedom spirit of the people which is highly respected by overseas investors, and a new building culture which was never been used before, this includes the living style in small units and the balance between the cost and asking price of developers and the new community expansion into rural areas.

Reforms should contribute to the prosperity of the sector and the process should expand to promote new products to the market with green energy incentives to boost home buyers’ confidence.

Authorities should reconsider the complicated process of the building permits and must ease the procedures of all pre-construction process. The government already decided to have an inventory of public properties which will be excellent merchandise for the PPP initiative to provide housing for low-income families. Interest rates hike added to the troubling housing sector, the Central Bank is facing a serious challenge to monitor the global rates and provide a new mechanism to provide liquidity to the market.

Parallel to this, new real estate ventures are expected to reflect the momentum of the Lebanese market leaders and inject liquidity to the market, CHO by Obegi and Fraction Real Estate Ownership by Hayek Group and many other initiatives by the Order of Engineers which is in the process to provide credible field data of the building licenses along with a national House Price Index. 

The easement of the housing loans pre-qualification process, Insolvency regulations and property juridical dispute resolution, and bringing clarity to transfer overseas funds are few among the main tasks of the government.

There are many economical and monetary challenges for the government to overcome the current critical conditions of the market. The private sector is in a do nothing state in view of the higher interest rates offered by local banks compared to the high risk of investment environment, yet the real estate tracking history still represents a safe haven for investors.

The inflow of funds from abroad is a major factor which will affect the market, many Lebanese regions will benefit from their expats who are well educated and act as highly paid officials and entrepreneurs, Beirut, Mount Lebanon and the North are expected to host many investments by its residents. While in other regions local authorities have to provide investment incentives to attract funds.

The challenges for the next three years of president Aoun’s term could reveal the immunity of the Lebanese resilient market which proved to overcome market crash due to severe political instability and dramatic local, regional and global crises.

Abdallah Hayek
CEO
Hayek Group

Oct. 2019

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