“Prices have gone up recently a little bit more than what people would have expected them to do,” Douaidy said in an interview in Beirut yesterday. “I don’t see this as a bubble. I view this as a normal progression of prices because there is demand for property in Lebanon and property is scarce.”
Real-estate sales in Lebanon in the first nine months were worth $7 billion, 60 percent more than a year earlier, while transactions increased 25 percent, Bank Audi SAL-Audi Saradar Group SAL said in a report yesterday. The boom has helped Lebanon’s economy defy the global crisis. The International Monetary Fund and the Central Bank forecast growth of 8 percent in 2010, from 9 percent last year.
Improved political and security conditions have encouraged real-estate investment, Economy and Trade Minister Mohammed Safadi said in May. Lebanon’s pro-Western premier Saad Hariri formed a national unity government, which includes the Shiite Muslim Hezbollah movement and representatives of other ethnic groups, in November. Lebanese buyers account for between 80 percent and 90 percent of the real estate market.
Lebanese real estate prices have grown at an average pace of 25 percent in the past five years, though that may slow to between 10 percent and 15 percent this year, said Raja Makarem, the founder of RAMCO, a Beirut-based real estate agency.
By comparison, European home prices began falling in the second half of 2007, and further declines are possible even in countries where prices have begun to recover, according to a June report by Standard & Poor’s.
While Lebanon is “‘booming beyond any expectation,” the pace of credit growth isn’t so fast as to raise concerns about a bubble, said Marios Maratheftis, chief economist for Standard Chartered Plc in the Middle East, in an interview last month.
That’s “not massive,” Maratheftis said. “To put it in context, there was a 50 percent increase in the United Arab Emirates back in 2008,” when Dubai property prices peaked before crashing, he said.
Total home loans of about $3.5 billion account for just 3 percent of Lebanese banks’ balance sheets, and the default rate is less than 1 percent, according to Salameh.
Lebanon’s currency peg to the dollar since 1993, coupled with high interest rates on Lebanese-pound deposits, has helped to attract billions of dollars to the country from Lebanese living abroad. That has enabled banks to finance consumer loan growth as well as the government’s fiscal deficits and one of the world’s heaviest debt burdens.
Solidere, which was set up to rebuild parts of central Beirut destroyed during the 15-year civil war that ended in 1990, had net income of $189 million last year and assets of $2.4 billion, according to Bloomberg data.
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