Real Estate back on track
Global Investment House –Kuwait – Lebanon Economic and Strategic Outlook –Real Estate sector-Due to the geopolitical reasons, Lebanon’s real estate and construction sector have been hit hard, resulting in destroyed buildings, construction put on hold and land prices fluctuating all the time. After 1990, a new strategy was developed by the government to rebuild Lebanon. In 2004, around US$7.4bn was invested in reconstruction. Contracts were issued include building infrastructure, rebuilding Lebanon.
The Real Estate sector relies somehow on the touristic potential. Since tourism has a big contribution to the GDP, more visitors means more hotels, complexes, apartments and other building will be built or purchased to meet the demand. Arab investors are among the biggest foreign real estate developers.
Real Estate and Construction contribution to the GDP is measured at LBP2,669bn ending 2005. The number is expected to have declined in 2006 due to the political conflict. However, its contribution will continue to grow and rebound after 2007 into 2008. Its contribution to the GDP increased at a CAGR of 6.2% from the period 2001-2005. Construction represented 8.2% of the total GDP in 2005.
Construction permits are considered the leading indicator of the well being of construction activities. It measures the well being of the construction sector. Construction permits have been decreasing for the period 1997-2007. Construction permits measured at 9,326 in 2007 decreasing from 11,285 in 2004 and from 15,463 in 1997. Construction permits have been decreasing at a CAGR rate of 5.4%. This is due to an assumption that more permits are issued to build taller buildings. Construction permits have increased to 1,366 thousand square meters in September end 2008. Construction permits have increased 30.7% in the first nine months of 2008.
Property taxes can reflect the amount of registered lands in the Real Estate Registry of Lebanon. The higher the taxes, the more the property purchased. Directorate of Real Estate shows that property taxes amounted to LBP123.8bn, or US$82.1mn, in the first four months of 2006. Property taxes rose by a significant 75.6% from LBP70.5bn in the same period of the previous year mainly due to a 164.2% rise in property taxes collected in Beirut. 2007-2008 post more tax revenues, in 2007; LBP403bn was collected from property taxes. Beirut witnessed the highest tax collection of LBP155.4bn, followed by the city of Jbiel with tax revenues of LBP62.5bn. This indicates that more investors purchased more properties thus the government is taxing more on them. In 2008, the first four months posted taxes from properties of LBP147.7bn thus a 19% increase from 2006. The rise in property taxes is related to the real estate boom in Lebanon and the region characterizing the period 2001-2008.
Table 01: Real Estate Transactions
2004 2005 2006 2007 July-2008
Beirut 4,694 4,637 4,941 6,355 3,432
Baabda, Aley, Chouf 13,582 13,008 13,580 18,219 10,432
Kesrwan, Jbeil 5,135 5,799 6,026 7,773 5,630
Metn 7,682 7,338 7,641 10,069 6,644
Tripoli, Akkar 4,655 4,680 4,546 5,681 3,707
Batroun, Koura, Ehden, 4,181 3,791 3,383 4,541 3,211
Bekaa 5,566 5,151 4,377 5,732 3,525
Saida 4,389 4,480 4,092 5,532 3,645
Nabatieh 2,819 2,680 2,441 3,787 2,237
Total 2008 52,700 51,564 51,027 67,689 42,463
Source: www.databank.com.lb
Real estate sales have been increasing on a perfect rate for all provinces in Lebanon, showing that the real estate sector is alive. Total real estate sector transactions has grown at a CAGR of 8.7% between the period 2004 to 2007. Jbeil and Beirut have posted the highest CAGR growth of 14.8% and 10.6% respectively. Transactions has been increasing each year reflecting a prosperous real estate market.
Commercial banks played a big role to facilitate the growth of construction, they loaned 13.7% of total loans given to the economy to the construction sector. Many foreign entities helped in loaning Lebanon to build its economy. The International Airport of Lebanon was helped financed by The European International Bank loaning US$100mn and Kuwait Fund for Arab Economic Development with another US$50mn. In 2007, donors from around the world pledged to give Lebanon US$7.6bn for rebuilding and development after the Hezbollah-Israeli Conflict. Saudi Arabia was among the biggest donor with US$1bn in development funding. Other donors include countries like France, China, Japan, Germany, The EU and United Arab Emirates.
Mega Projects
La Residence by Ivana Trump - A joint venture between Damac of UAE and Ivana Trump to build a 27 storey building in Beirut City Center, It will cost US$150mn.
Saifi Village II - A new residential project that consists of sixteen low rise building along the Mediterranean Sea and the mountains of Lebanon. The project is developed by Solidere of Lebanon and Deyaar of UAE. It will be located in the Beirut Central District.
Beirut Gate - A US$600mn projects by Abu Dhabi Investment House which will be an integrated commercial and residential sea-view project. The project development will cover 21,448sq/m. The buildings will be designed by four world class architects, including Nabil Gholam of Lebanon and Chritian de Potzempark the Frenchmen.
The Platinum Tower - It will be the highest building in Beirut ending 2008 and will cost US$200mn. On completion, it will have a height of 153m with 34 floors.
Phonecian Village - A mixed use project consisting of 260,000sq/m of floor area, posting the largest real estate development to date. Phonecian Village will contain 4 towers towering at a height of 160m. It will include cultural activities, corporate offices, and residential and hotel opportunities. The companies involved in the project are Kuwait Al Dhow Investment and Solidere of Liban.
