Lebanese real estate developers shrug off market downturn with new projects

Published July 13th, 2016 - 12:00 GMT
In the absence of reliable market data, developers are continuing to build despite a seemingly saturated market. (Promofair/Dream 2016)
In the absence of reliable market data, developers are continuing to build despite a seemingly saturated market. (Promofair/Dream 2016)

Lebanese real estate developers dismissed Monday an imminent, drastic fall in property prices in Lebanon, despite the abundant amount of apartments in the country. “Real estate prices cannot fall sharply in Lebanon because lands on which real estate developers constructed their projects were purchased at very high prices,” Fady Jreissati, chief executive of Sakr Real Estate, said on the sidelines of the Dream 2016 exhibition.

Jreissati explained that some developers are offering limited margins of discounts ranging between 10 and 15 percent just to attract buyers and get rid of their remaining stock.

“We, at Sakr, are doing some very minimal discounts but we cannot cut down our prices by a huge margin,” he said.

Dream 2016, the latest iteration of a yearly event, aims at gathering real estate firms to showcase their latest developments in the sector.

The exhibition, in its sixth edition, started Monday and will last until July 14 at BIEL.

Plus Properties CEO George Chehwan echoed Jreissati’s remarks by saying that some developers resort to offering 10 percent discounts on their residential units because they prefer to minimize their profit a bit to be able to pay back their loans to the banks.

“Most of the developers in Lebanon start with their projects by taking loans from banks and if their units remain unsold for five or six years, they end up wasting a huge part of their profit by paying for the interest rate charged by the bank,” he said.

Likewise, Ghassan Medawar, sales manager at Conseil et Gestion Immobiliere, said that prices remained relatively stable with only minimal discounts by some developers who have a small remaining stock. “We cannot say that prices fell sharply but they have been revised according to the trend in the market,” he said. “Even if we have very high specs we have to follow the market to be able to sell,” he added.

Medawar noted that most of the high discounts are taking place in the secondary real estate market – where pre-existing units are bought and sold.

Real estate developers interviewed by The Daily Star reported a low demand on residential units compared to previous years.

Chehwan explained that  resulting in an oversupplied market.

“Developers start with their plans without having accurate statistics about existing projects which result in an oversupplied market,” he said.

“Our market is oversupplied today and this is why demand seems to be low,” he added.

Despite the relatively lower demand, Jreissati feels optimistic about the future of the market: “It is true that demand is lower than before, but I am happy that we are still witnessing some demand.”

Jreissati believes that real estate is the most secure investment and people should be encouraged to buy properties today because prices will definitely go up when any positive political change take place in the country. “Even if prices are still stable, some developers may be willing to sacrifice 10 percent of their profits to be able to sell,” he said. “It’s a buyers’ market today; one can find good deals.”

Developers at Dream 2016 said that most of the demand today is focusing on small apartments due to people’s lower purchasing power.

“Most of the demand today focuses on small units ranging from 100 to 150 square meters and this is why we are only getting involved in projects with small residential apartments nowadays,” he said.

Medawar reiterated Jreissati’s remarks, saying that most demand is focusing on small apartments.

Developers said that investors from the Gulf are absent and most of the buyers are Lebanese expatriates and locals.

This year, Dream 2016 featured major Lebanese banks racing to attract buyers with competitive services and housing-loan packages.

A Bankmed representative at the exhibition told The Daily Star that the bank is offering smart home automation solutions with every housing loan. He explained that clients can download an application on their mobile phones, allowing them to control routine home activities, security, protection and energy conservation, especially when they are away and need to keep an eye on their houses

By Dana Halawi

All photos courtesy of Promofair/Dream 2016


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