Towers, luxurious buildings, compounds and medium sized dwellings are being built and sold at unaffordable prices.
For many years, the real estate sector including construction and the financial sector have been the main pioneer sectors of the Lebanese’s economy. Both sectors are arguably the most stable ones.
The real estate market has been growing significantly over the past three decades and people are constantly investing in it. Today, it constitutes 19% of the Lebanese GDP (14.5% from the real estate and 4.5% from the construction).
Towers, luxurious buildings, compounds and medium sized dwellings are being built and sold at unaffordable prices which ideally implied that the supply side is not meeting the demand side any time soon i.e. many apartments in Beirut are being left empty.
At this stage, it is essential to ask: For whom are these being built? Is it for the graduating youth? Is it for the average Lebanese family who can barely pay off their child’s college tuition? Or is the target some elitist families and businessmen?
Some investors might argue that the prices of apartments and houses are not as high as they seem to be and that, comparably, prices tend to be much higher in most if not all European countries.
Per the World Bank, the income per capita* in Lebanon is estimated to be 8,050.75 USD as they include in the calculations the 1.5 million Syrian refugees and around 450 000 Palestinians. If Syrian refugees are disregarded in this calculation, the income per capita would be around 11,300 USD. However, the refugee component cannot be ignored although most of them do not have the same weight than the Lebanese in the GDP’s contribution. Therefore, an estimate of an average income per capita for a Lebanese resident would be around 10,000 USD per year.
Also, per Index Mundi, the income per capita in Lebanon on a purchasing power parity basis is 18,200 USD compared to 41,200 USD in France. This is 2.3 times higher than Lebanon.
In Beirut, the prices of an apartment’s square meter vary between 2,600 USD and 6,500 USD while factoring in the price of common areas, balconies, and walls. This means that the real prices become 30% higher than the announced ones and the square meter’s price would vary between 3,380 USD and 8,450 USD.
If one compares this to a developed and industrialized country such as France, the prices in Paris would vary between 6,800 and 17,000 USD per square meter an amount that is almost the double than that in Beirut.
Interestingly, Per Numbeo:
The average monthly salary in Lebanon is 1,007 USD Versus 2,173 USD in France. This is 2.2 times higher than that in Lebanon.
The mortgage interest rate in Lebanon stands at 6.66% whereas in France it does at 2.34%; which implies that the interest cost to acquire a dwelling is 2.85 times higher in Lebanon than in France, meaning that the cost of the interest rate is 35% of that in Lebanon. Moreover, the minimum wage in Lebanon is 450 USD compared to 1,673 USD in France. This is approximately 3.7 times higher than that in Lebanon. Consequently, it can be said that even if in a cosmopolitan city like Paris, the price of an apartment is roughly equal to the double of that in Beirut, the income per capita in France is more than the double compared to Lebanon per the different criteria mentioned above. These comparisons could be done between Lebanon and other developed countries and the conclusion would still be the same.
One should not forget that the income per capita in Lebanon cannot measure the inequalities and so, the situation is even worse. In fact, lower – middle class and poor families representing a majority in the country cannot afford to acquire an apartment especially if we add to that the outrageous costs of education, healthcare and transportation. Per the World Bank, 70% of the population generates an annual income of less than USD 10,000
The existence of this massive inequality in the Lebanese society and the inability of the greater part of the population to buy a dwelling explains the relative stagnation in this sector.
*: Income per individual