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Survey says real estate expected to flounder in 2015

23/07/2015

BEIRUT: The once-thriving real estate sector in Lebanon is expected to see a drop in sales and transactions in 2015, while the banking industry will continue to maintain good results, a number of leading economists said.
“Lebanon’s real estate sector is expected to lag behind the rest of the economy in 2015,” according to the Lebanese Economic Outlook, a survey of 15 leading Lebanese economists conducted by Economena Analytics, an independent economic data provider.
The survey said that six of the 15 surveyed economists believe that real estate will be the worst performing sector in 2015, reflecting widespread pessimism over activity amid uncertain political and security environments, and weak demand from foreigners.
“Construction activity is also seen lagging behind in 12th place among 15 sectors, and growth in manufacturing activity, excluding food and beverages, is expected to considerably underperform the economy during the year,” the report said.
Developers all agree that the demand for apartments has shifted to small- and medium-size units outside Beirut. They also noticed that the demand for luxury apartments in the capital has almost come to a standstill and most attribute this sharp decline to the exorbitant prices, regional tension and the reluctance of Arab investors to buy properties in Lebanon under the current circumstances.
“Stagnation in construction is expected due to the decrease in real estate transactions by foreigners by 14 percent in 2014, as well as a lack of foreign investments, the absence of expats and a tense security situation,” economist said.
The value of real estate transactions in 2014 had increased by only 2.8 percent to $8.95 billion, while the number of transactions rose by 2.2 percent.
“Although still positive, the consensus among participating economists indicated that realty prices would struggle to hold at their current levels. On the opposite side, five economists chose banking as their top sector pick for the year, while four said restaurants and ICT [information and communications technology] would be the fastest growing sectors in the economy,” the report said. But the report emphasized that banks will continue to be the driving force of the Lebanese economy in 2015.
“The Lebanese banking sector enjoys a historically proven immunity toward internal or external shocks, and is always praised for its encouraging performance, even in times of crisis,” Joelle Samaha of Credit Libanais said.
The survey also showed increasing demand for health and medical services next year. “The increase in the resident population will also contribute to increased demand for health and social care, although refugees do at the same time contribute to the crowding out of domestic private demand,” Nassif said. In particular, Nassif pointed to “limited resilience capacity of the health system with an increased utilization of around 50 percent for PHC [primary health care] and hospital services.”
Tourism is also expected to improve in 2015 with nine economists forecasting an increase in tourist arrivals during the year, and none predicting a decline. Most of the economists stressed that the security situation would be one of the main factors which will determine the future of tourism, hospitality and, to some extent, real estate.
Economists were unanimous in their pessimism over the local labor market, with 14 of the surveyed economists anticipating an increase in unemployment in 2015, and one projecting stable employment.
However, the economists had varied views about the outlook for exports, private deposits, inflation, new car sales and stocks, although most of the expectations were tilted toward an increase in all the aforementioned indicators.
The consensus growth forecast among the 15 surveyed economists was 2 percent in 2015. Forecasts ranged from minus 1.5 percent to 4.3 percent, with most economists pinning their forecasts on domestic political and security developments.
The IMF estimates that Lebanon’s economy grew by 1.8 percent in 2014, a slight pickup over 2013
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