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Reference: In Dubai, Real Estate is an investment. In Lebanon, It's a statement. Can that explain the different paths taken by the markets in recent years?

Author Dan hilton

Before the bubble burst in 2009 it seemed that, much like with the emirate's multiplying high-rises, the sky was the limit for Dubai’s property market. Over a six-year period before the crash Dubai’s property prices almost quadrupled, with ozymandean projects such as the Jumeirah Garden City and Dubailand costing an estimated $64 billion respectively.
However, Dubai wasn't the only location in the region enjoying unprecedented success. Seemingly recovered from a damaging month-long war with Israel in 2006, Lebanon started recording figures of growth in the real estate sector that few could have predicted, as property prices shot up by 25-30 percent each year between 2007-2010. Growth on this scale naturally made people worry that Lebanon, like Dubai was experiencing a property bubble, though from 2011 political and security trouble slowed the growth of prices to a standstill. Despite this, prices have not dropped, evidence that Lebanon's market is unlikely to crash, founder and Managing Director of real estate advisers RAMCO, Raha Makarem, told BOLD.

Speculative Interest

"What I believe differs in the Lebanese and Dubai markets is that Dubai seems to me a more speculative market for investors, from all over the world," Makarem said. Foreigners, he said, buy in Dubai hoping that they will earn more money, or in order to have a pied-a-terre there.
Overseas investment in Dubai was soaring before the crash, with the foreign ownership index of properties kept by Colliers International rising 116 percent from the first quarter of 2007 to the third quarter of 2008. However, when the global financial crisis hit in late 2008, it hit hard. Foreign investors in Dubai property disappeared, down 50 percent in the fourth quarter of 2010 compared to its peak in the third quarter of 2008, as liquidity dried up worldwide.
The Lebanese real estate market, on the other hand, does not rely on foreign investment. A political impasse and overspill from the civil war in neighboring Syria has caused property prices in Lebanon to stagnate since 2011, but there has been no crash, as some were predicting . "This shows that the market in Lebanon is real – it is not fictitious, it is not speculative," Makarem said. Lebanese, he explained, prefer to buy using cash money, and if they do borrow to buy it is against not more than 60 percent of their property.
The market is not speculative, according to Makarem, as the great majority of buyers are Lebanese looking for a permanent residence for them and their family. "So this is why the reactions I think were a bit contradictory between the crash that happened in Dubai and the political crisis in Lebanon that has created a crisis in the real estate market," he said.

Constant DEMAND

Accordingly to Makarem, there is, and always will be, a constant demand for property in Lebanon. "In my opinion this is because the real estate market in Lebanon relies on the most important industry that Lebanon has-the export of human minds," he said. Accurate figures are notoriously hard to come by, but the Lebanese diaspora is estimated to be some15-20 million people, more than three times the population residing in Lebanon itself. For many Lebanese overseas, the desire to return to the homeland and own a permanent residence is a strong one, Makarem said. He explained that this is the main source of income for the Lebanese real estate market, and one that will never dry up. "When a Lebanese is born here he gets the bug of wanting to own a house or flat in his village. It stays with them wherever they go, and the moment they succeed, the first sign of success is to own a flat or a house in the village."
Unlike Dubai in 2009, where values slumped by about 65 percent, this permanent demand means there has never been a serious drop in the Lebanese real estate market, except for the crash of the Lebanese pound in 1987 that hit the value of all the country's markets. "There are periods of stagnation and sometimes you don’t find any liquidity in the market," Makarem said. "That is the worst it can reach."

Foreign Investments

Dubai's woes seem to be behind it now. The two years through 2013 saw values surge by an astonishing 56 percent, and according to, in December 2014 Dubai's all-residential property price index recorded a 16048 percent growth year-on-year. This prompted the emirate's regulators to take steps to cool the market in order to avoid another crash. But still there are concerns that factors such as plummeting oil prices and the currency woes of many European countries, where a great number of Dubai's investors come from, will lead to another significant drop in values. For Lebanon, there has never been such a reliance on foreign investors. " The first time we had foreign investors was in 2006," explained Makarem, adding, "that's when some Gulf investors made their largest investment in Lebanon." He pointed to the Phoenicia Village project, backed by Kuwaiti company Levant Holdings, as a grand project backed by Gulf money that might have been a sign of things to come in Lebanon had it not been for the Lebanese-Israeli war of July 2006. Since then, Makarem said, foreign investment has been non-existent. "This is another proof of how strong the local market is when it can sustain itself during such a freeze of investments from foreigners overseas." Of course,despite being able to operate and even grow without serious investment from overseas, that is not to say that foreigners are not welcome back in the Lebanese market. Makarem is confident that they will return. "Their absence from the Lebanese market must have given them the chance to compare," he said. "I'm sure that no other investment anywhere in the world would have given better results for the last 10 years than the result in Lebanon, in spite of the security and political scene."

Room for Growth

Despite its constant demand and encouraging figures of growth in less restive times than these, the lack of infrastructure in Lebanon may cause some to balk at investing in property here. "Yes there is a discrepancy when you tell me there are places in Beirut that are selling at $12-15,000 a square meter, more expensive than Washington or New York," admitted Makarem. "People find it strange in a chaotic place like Beirut with the traffic, where so many problems face whoever wants to live here, it looks a bit strange." Dubai has no such trouble. Meticulously planned out and far from warzones destabilizing neighboring countries, there are perhaps more obvious benefits to investing there. However, Makarem warned that as a project sprung from the desert, the challenge of maintaining the traffic of tourists and travelers might be greater than it seems. Lebanon, he said, with its ease of life, fine weather, mountains for skiing and location on the Mediterranean, has many attractions that make it a sustainable market, despite all the odds.
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