29 October 2010

* Beirut’s property boom prices many Lebanese out

Beirut used to conjure up images of clear skies, sparkling sea and red-roofed Ottoman-era houses, but cranes and new buildings now puncture its Mediterranean skyline and the cacophony of bulldozers has shattered the idyll.

All over Beirut, developers are spending hundreds of millions of dollars building luxury flats for high-income Lebanese, and prices are soaring, especially in the central district widely dubbed Solidere after the company that rebuilt it from the ruins of the 1975-1990 civil war.

While analysts insist no property bubble is looming, price rises are forcing middle income Lebanese out of a capital city some refused to leave even in the midst of war and unrest.
"I'm frustrated. It's going to be a while before I can afford something and I'll have to get a loan and pay for it for a long time," said Labib Ghulumiyyah, a 35-year-old doctor, who has been trying to buy an apartment for two years.

"With all the problems in Beirut, I'd still rather be here."

A 2010 report by property consultants Cushman and Wakefield said Beirut was the 30th most expensive retail rental city in the world, up three places from last year, and the most expensive compared to 10 cities in the Arab world.
Retail rents in Beirut's Solidere area stood at 1,470 euros ($2,063) per square metre, ahead of Luxembourg, Stockholm and Tel Aviv.
In Beirut's central district, a mixture of restored period properties and new buildings, property sells for anything from $7,000 to $13,000 a square metre. Other prime Beirut neighbourhoods see prices in the range of $4,000 per square metre, several real estate experts have said.
Lebanon's Central Bank Governor Riad Salameh said the sector was worth $10 billion a year in sales and projects.
That may seem small compared to even single developments in the oil-exporting Gulf, but is a lot of money for Lebanon.
To put the numbers in perspective, Lebanon's government budgeted total spending of $12 billion for 2010.

Unfazed by politics
Demand in Beirut has been driven up by Lebanon's large community of expatriates, who are either returning or want a foothold in the city though they do not live there full time.
Wealthy Gulf Arabs and Lebanese who are buying flats as an investment for their children have also pushed up prices.

Analysts and real estate experts insist, however, that this is not a property bubble in the making because the buyers are end-users, not speculators, and many are either paying in cash or borrowing amounts they can afford.

"I don't believe there's a bubble in the market. It's true that prices have risen significantly, but they emanated from a low base so prices today are more in line with regional and international benchmarks," Marwan Barakat, head of group research at Lebanon's Bank Audi, told Reuters.

Salameh, the central bank governor, said Lebanon's property sector was not overleveraged so he did not expect a price crash.

"The credit linked to the real estate sector does not exceed 8 per cent of the total balance sheets of our banks. Usually you have negative effects on real estate prices when there is high debt attached to that sector," he told Reuters.
"We expect prices to level after this big increase and historically we have seen this pattern in Lebanon, where you have a quick rise, and then a levelling and then another rise."
Only a dramatic deterioration in security could hit demand for property, but even that does not seem to faze developers who are breaking ground on projects across Beirut.
Indeed, Lebanon's resilience has translated into an average of 8 per cent growth for the last three years, driven by strong consumer confidence.
Property prices have risen 30 per cent each year since 2007, Barakat said, impressive for any city let alone one that has seen dozens of bombings, weeks of protests, days of deadly clashes and a war with Israel in the last five years alone.
House prices fell only 2.3 per cent during the a 34-day war Israel fought with Hizbollah in 2006, according to a December 2009 Global Property Guide, and residential property prices in central Beirut rose 40.7 per cent in the second quarter of 2009.
But in a 2010 report, the guide warned that Beirut properties were becoming too expensive.
"Lebanon is now overvalued, in our opinion," it said.

More projects under way
There are now more than 20 developments under construction in the prized area of central Beirut.
One is the $500 million Beirut Terraces project, developed by Benchmark, where the asking price for an apartment starts at $7,200 a square metre and reaches $12,500 a square metre for the penthouse, with delivery in 2014.
Beirut Terraces, which boasts an "open air sparkling marina coastline" and "lush suspended gardens" has been 30 percent sold off-plan - a trend that is growing and that helps developers finance construction without resorting to too much borrowing.
Zina Dajani, Benchmark's managing director, admits the market for luxury properties is smaller than that for more affordable homes, but says demand for high-end real estate remains strong enough to justify such projects.
"Those who are looking for a deal are not the clients we are looking for," Dajani said. "In Beirut, prices have been raised enough not to allow you to cater to the mid-income level."
Bank Audi's June 2010 research says real estate sales grew 19.5 per cent a year between 2004 and 2009, and more than doubled in the first five months of this year.
But despite Lebanon's resilience to political upheaval, tensions have grown in recent months amid reports that an international tribunal could indict Hizbollah members in the 2005 assassination of Rafik Al Hariri, the former prime minister who was the driving force behind Solidere.

Sectarian rhetoric has grown and some politicians have even warned of a return to civil war.
Anthony Al Khoury who is developing the $250 million District//S in Solidere said there is still demand but that political worries make it difficult to conclude sales.
"The political factor is the biggest risk to the market, for us as a developer, this is how we see it," he said.


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Lebanon Time-Line

Introducing Lebanon

Coolly combining the ancient with the ultramodern, Lebanon is one of the most captivating countries in the Middle East. From the Phoenician findings of Tyre (Sour) and Roman Baalbek's tremendous temple to Beirut's BO18 and Bernard Khoury's modern movement, the span of Lebanon's history leaves many visitors spinning. Tripoli (Trablous) is considered to have the best souk in the country and is famous for its Mamluk architecture. It's well equipped with a taste of modernity as well; Jounieh, formerly a sleepy fishing village, is a town alive with nightclubs and glitz on summer weekends.

With all of the Middle East's best bits - warm and welcoming people, mind-blowing history and considerable culture, Lebanon is also the antithesis of many people's imaginings of the Middle East: mostly mountainous with skiing to boot, it's also laid-back, liberal and fun. While Beirut is fast becoming the region's party place, Lebanon is working hard to recapture its crown as the 'Paris of the Orient'.

The rejuvenation of the Beirut Central District is one of the largest, most ambitious urban redevelopment projects ever undertaken. Travellers will find the excitement surrounding this and other developments and designs palpable - and very infectious.

Finally, Lebanon's cuisine is considered the richest of the region. From hummus to hommard (lobster), you'll dine like a king. With legendary sights, hospitality, food and nightlife, what more could a traveller want?

Introducing Beirut

What Beirut is depends entirely on where you are. If you’re gazing at the beautifully reconstructed colonial relics and mosques of central Beirut’s Downtown, the city is a triumph of rejuvenation over disaster.

If you’re in the young, vibrant neighbourhoods of Gemmayzeh or Achrafiye, Beirut is about living for the moment: partying, eating and drinking as if there’s no tomorrow. If you’re standing in the shadow of buildings still peppered with bullet holes, or walking the Green Line with an elderly resident, it’s a city of bitter memories and a dark past. If you’re with Beirut’s Armenians, Beirut is about salvation; if you’re with its handful of Jews, it’s about hiding your true identity. Here you’ll find the freest gay scene in the Arab Middle East, yet homosexuality is still illegal. If you’re in one of Beirut’s southern refugee camps, Beirut is about sorrow and displacement; other southern districts are considered a base for paramilitary operations and south Beirut is home to infamous Hezbollah secretary general, Hassan Nasrallah. For some, it’s a city of fear; for others, freedom.

Throw in maniacal drivers, air pollution from old, smoking Mercedes taxis, world-class universities, bars to rival Soho and coffee thicker than mud, political demonstrations, and swimming pools awash with more silicone than Miami. Add people so friendly you’ll swear it can’t be true, a political situation existing on a knife-edge, internationally renowned museums and gallery openings that continue in the face of explosions, assassinations and power cuts, and you’ll find that you’ve never experienced a capital city quite so alive and kicking – despite its frequent volatility.