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.