For the people of Lebanon, real estate, not gold, is a safe haven in this economic crisis


In the midst of endless crisis and disasters, Lebanon’s residents trust property and anticipate deal flows in 2020.
Image source: AP

Real estate has become something of a haven in Lebanon amid the dire economic crisis as a number of investors have shifted their funds to the sector.

Fear of a “haircut” on bank deposits, the official devaluation of the Lebanese pound and, compounded by the introduction of informal capital controls, drove residents into property in order to secure their lives.

According to a report by Bank Audi, housing estates are in great demand among people looking for a long-term investment. After a double-digit decline in recent years, such transactions rose 110 percent to $ 14.4 billion in 2020, according to Byblos Bank.

Stay with property

Analysts agree that real estate is unlikely to see any depreciation this year after a demand-driven increase of at least 30 percent through 2020. A senior spokesman for Solidere, the developer of the post-civil war reconstruction of downtown Beirut, stressed that for obvious reasons, people want to secure and preserve their savings. They would rather invest in real estate than risk any other locally available option.

Amid all of the turmoil Lebanon and its people have struggled with, Solidere recorded a significant number of transactions totaling $ 393 million (unaudited 2020 results) to both existing and new investors buying properties in downtown in terms of the quiet preservation of value.

Sold out overnight

Byblos Bank’s chief economist, Nassib Ghobril, property developers sold most of their residential properties in a matter of months that had had no demand for the past four years, which helped them repay bank loans and subcontractor fees.

It is worth noting that foreigners have largely stayed out of the market in view of the worsening framework conditions, as evidenced by the ongoing decline in sales to foreigners by more than 30 percent during the ongoing crisis, according to the Bank Audi report.

While the housing market is showing interest again after years of persistent sluggishness, commercial real estate is in a downturn in the context of the economic downturn exacerbated by the pandemic.

No slacking off in the crisis

The current real estate situation is likely to continue in 2021, albeit in a weaker form, as most property developers have covered their loans. They are expected to sell any remaining stock in US dollars, with a “fresh” payment – a term used for overseas remittances where the owner is free to repatriate the amount – due to the unofficial devaluation of the Lebanese pound from US -Dollars are in Lebanese banks.

This would cover their construction costs, which will have doubled in 2020, says Mireille Korab Abi Nasr, Vice President of the Real Estate Developers Association in Lebanon (REDAL).

The country is still waiting to resume negotiations with the International Monetary Fund, as this is the only way out of the crisis. While further delays are bad news for Lebanon, it is certainly good for those developers who may still have unsold inventory.

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