Active apartment sales
mainly high-end and small

Buyers rush to snap bargain deals in anticipation of higher prices

The real estate sector is characterized by an active secondary market with brokers reporting increases in sales especially of small and pre-owned apartments, according to a survey conducted by InfoPro Research and published in Lebanon Opportunities magazine.

According to the ‘Residential Real Estate Survey’ which covered a sample of over 50 developers and 25 real estate consultants and brokers, nearly 61 percent of respondents said the number of sales transactions of apartments in Greater Beirut increased over the previous 12 months compared to only four percent reporting an increase in sales last year.

Around 56 percent stated that the number of sales transactions of pre-owned apartment in Greater Beirut increased during the past 12 months compared to 36 percent reporting a growth in the number of sales transactions of new apartments. Both supply and demand for new apartments are low. “Virtually nobody is willing to buy a new apartment if it is not more than 90 percent complete and ready for sale. In the beginning of 2022, there were some sales of new apartments as certain people were still using checks to settle their debts,” said Joe Kanaan, CEO of S-Gestion. According to Namir Cortas, Chairman of the Real Estate Developers Association (REDAL), this is a secondary market as brokers are the major sellers not developers and as recently completed projects have already been sold. “The market is still down. It is not exciting and lacks momentum. There is no story to tell,” he said.

Small high-end apartments are in high demand because they are easier to sell. Kanaan said: “People who were hoarding money in homes are buying small apartments for $250,000-$300,000 in order to rent them out. They aim to generate income instead of keeping the money idle in homes.” The small apartments bought for investment purposes are often of sizes ranging from 100 square meters (m2) to 150 m2 and are usually situated in prime locations, according to Mohamad S. Sinno, Managing Director of Vertica Realty Group.

Apartment prices have significantly improved in Beirut and in high-end areas like Fakra/Faraya but current average prices still represent 50 to 70 percent of pre-crisis levels. According to Kanaan, apartment owners increase their prices, generally by ten to 20 percent, when they see that there is some increase in demand. “The ask price means nothing if it doesn’t result in a sales deal. Therefore prices must remain stable to allow the sector to remain active,” he said.

The InfoPro survey shows that 58 percent of respondents expect prices of new and pre-owned apartments to increase in the next six months. The increase is expected to range between 15 percent and 29 percent and will be driven by a potential rise in demand including demand by foreign investors in addition to possible resumption of bank lending and stronger purchasing power in tandem with the growing dollarization of the economy.

Anticipation of higher property prices in the near future is also fueling demand which in its turn is driving prices up. “Buyers are looking for hot deals. They want to benefit from current bargain prices,” said Wissam Habchi, Vice President for Sales and Marketing at MENA Capital. According to Sinno, buyers expect prices to rise since replacement cost is high. “High demand will lead to a further surge in prices,” he said.

The survey showed that 68 percent of buyers are non-residents with local residents accounting for the remaining 32 percent. Foreign and Arab investors especially Gulf investors are conspicuous by their absence. Habchi said: “Foreigners are not investing in Lebanon in these circumstances.” According to Cortas, non-resident apartment buyers mostly consist of expatriates especially those who are not able to deposit their funds in European banks, such as expats in Africa, or those who are not sophisticated enough to invest in global markets.