Following years of spectacular growth, Lebanon's property market has witnessed a steady decline since early 2011, especially in the luxury segment. However, interest from locals and expatriate Lebanese remains solid.

It seems a matter of all thumbs down for Lebanon's real estate market. Following an 11% decline in volume in 2011, the annual number of property transactions fell by 9.9% in 2012 and by 7.1% during the first eight months of 2013, according to Lebanon's Directorate of Land Registry and Cadastre.

The value of property transactions still increased by 3.8% to amount to nearly $9.2 billion in 2012, yet that too was on the decline in 2013. The value of sales reached $4.6 billion during the first seven months of 2013, a decrease of 2.8% when compared to the same period in the previous year.

In addition, fewer apartments are being sold to foreign buyers. Following a 20% decline in 2011, sales to foreign nationals registered an 8.9% decrease to 1,394 units in 2012. The trend continued with an 8.6% drop over 1H2013. In this context, the market was not helped by the travel warning in Lebanon that was issued by GCC member states.

Likewise, the number of construction permits issued in 2012 and early 2013 registered a decline, signaling a future lull in building activities for the years to come. Yet another trend illustrating a sluggish market is the drop in pre-sales. According to a study by Ramco Real Estate Advisers, only 29% of buildings completed in 2012 were sold out before completion, compared to 50% by the end of 2010.

Ramco also concluded that 72% of luxury apartments completed in Beirut in 2012 remained unsold by mid-2013. A total of 100 buildings were completed in Beirut in 2012, of which 65 had a sales price of at least $2,800 per sqm. According to a survey conducted by InfoPro Research in June 2012, nearly half (47.69%) of all new apartments in Beirut were priced above $4,000 per sqm.

Lebanon's economy has been dented mainly by a lack of tourist arrivals due to the conflict in neighboring Syria. As Lebanon's border with Israel remains sealed, Lebanon's only connection with the rest of the region leads through Syria. Most Arab tourists, mainly from the UAE and Jordan, tended to visit Lebanon by car. Instead, nearly 1 million Syrian refugees fled to Lebanon, which by the end of 2013 had still not been able to form a new government. Due to the lack of economic and political stability, both property developers and buyers have adopted a wait-and-see attitude.

On the other hand, the housing sector received a welcome boost in January 2013 when the Banque du Liban, the central bank, announced it would lend up to $1.3 billion to commercial banks at an interest rate of 1% until the end of the year. Although the plan intended to support various productive sectors, some 56% was aimed at offering affordable housing loans in an attempt to prop up the market. Shortly after, interest rates of as low as 2.5% and up to 90% financing were on offer.

“The real estate sector has been slow in recent years, especially in Beirut, where most developments tend to cater for large luxury apartments," said Hani Haddad, Managing Partner of Development H. “These developments usually require demand by expatriates and foreign clients, who have become more cautious given the current instability in the region."

“Property developers long had a niche market to build large, luxury properties for the top 5% of the market and make lots of money in the process," said Elie A. Harb, President of real estate advisers Coldwell Banker. “But those days are gone. The high-end buyers are not here. Small apartments are a local demand, which is the only thing you see today. Before, such local demands were masked by high-end items and multi-million dollar transactions. Now, most residential transactions are consistent with today's demand for small and affordable apartments between $150,000 and $250,000."


The turn toward small- and medium-sized apartments started a few years back. A survey by the Credit Libanais Economic Research Unit showed that between 2009 and 2011 the share of apartments sized between 101 and 150 sqm increased by 26.3% to take up nearly half the market's volume. All other apartments sized up to 500 sqm witnessed a decline.

“If you build apartments with a sales price of $2,500 to $3,500 per sqm, you can still sell," said Joe C. Kanaan, President and Director General of Sodeco Gestion. “But they will have to be relatively small, between 80 and 120 sqm in size. If you build between 400 and 500 sqm and ask $5,000 per sqm, you may only sell one, infrequently."

The kinds of construction permits issued in recent years confirm the trend towards building more modestly sized apartments. Another trend concerns a move away from the capital. As land is increasingly scarce in Beirut, it is simply becoming too expensive to build in the capital. Families and young couples prefer to live in the suburbs and nearby mountains.

The ever-increasing price of land is the main reason why property prices so far have not witnessed a significant decline. Most experts estimate there has been a 10% to 15% drop in value. Another reason has been a rise in demand from Syrian refugees. While most of them live in low-quality accommodation in the north and east of the country, over 100,000 flocked to Beirut. The bulk of them rent rooms at inflated prices in the city's poorer areas, yet the rich among them have been able to buy luxury apartments in areas such as Verdun and Hamra.


While the residential market has contracted in recent years, there has been an upswing in the construction of office space. According to Ramco, 32 office towers were under construction in and around Beirut by mid-2013 adding 147,871 sqm to the market. As the country's capital and largest city, Beirut attracts most of the country's business.

Traditionally, the Beirut Central District and Hamra were the main areas of choice for office space, yet today most development takes place on the outskirts of the capital. The heart of Beirut has only four commercial projects in the pipeline, while two buildings are being erected in and around Hamra, mainly catering to the medical sector. Two-thirds of the new office towers are located on the edge of east Beirut, where the average price of land is significantly lower than in the more central parts of the city.

With average rent of $657 per sqm, the Beirut Central District in 2012 was ranked as the 24th most expensive city in the world in terms of office space, according to the American consultancy firm Cushman & Wakefield. The same company ranked Beirut as the 36th most expensive city among 62 cities worldwide, as well as the most expensive Arab city in terms of retail rent.

The leading retail location was the ABC Center in Achrafieh with a rent of $2,136 per sqm per year, almost twice the regional average. Other major shopping destinations in and around Beirut include Kaslik ($1,600/sqm), Verdun ($1,494/sqm), Beirut Central District ($1,282/sqm), and Hamra ($908/sqm). As a comparison, with a rent of over $30,000 per sqm, Hong Kong's Causeway Bay was the world's most expensive shopping district.

On the Lebanese retail front, the most eye-catching new development of 2013 was the opening of the Beirut City Centre mall. The first project of Majid Al Futtaim (MAF) Properties in the Levant, the $300 million mall offers some 650,000 square feet of retail space, as well as a Carrefour hypermarket, cinema complex, and 40 food and beverage outlets. In 2013, MAF also started constructing a second mall in Dbayeh, just north of Beirut.