News broke two weeks ago confirming what I had suspected for some time: that the Lebanese property market has succumbed to a decomposing economy.
Because quite how mid and high-end residential units were cheerfully changing hands – even if many were bought with expat money – when Lebanon was in the grip of an existential crisis was always baffling. So it was as if a very big elephant had been evicted from the room when the real estate developer Mena Capital admitted that it had pulled the plug on Bella Casa, a residential project on the outskirts of Beirut, made up of 180 apartments spread across three towers and marketed as an exclusive “gated community”, serving the city centre and the eastern suburb of Ashrafieh.
Bella Casa’s specs were relatively modest compared to some of the more sumptuous creations that have sprung up in recent years. This was not a marquee project aimed at the high-end Gulf punters and so its failure was in many ways all the more worrying. Moreover, it is the first time that the usually self-assured Lebanese real estate sector has conceded that demand has all but evaporated. We all suspected what was going on; I am just surprised it took this long to get out.
An entry-level family home in Beirut, if you can find one, starts at US$3,000 per square metre, while in the ‘burbs, this drops to around $1,000 per sq metre. But to put all this in some kind of perspective, it is worth remembering that GDP per capita is a modest $10,000. You might as well live in London or Tokyo.
Prices began their impressive ascent after Lebanon’s 2006 war with Israel, driven up by multiple factors: a surplus of Gulf liquidity courtesy of increased oil prices, more expat salaries, a spike in post-war construction costs, low interest rates, bad urban planning and virtually no controls on who could borrow to purchase (groups of “investors” would buy into properties only to flip them later, often before the project had been completed), all of which forced would-be local buyers on to the very fringes of the market.
Apartments became commodities; traded but not lived in. Great for some, miserable for others who simply wanted to get on the ladder. The government couldn’t care less. GDP was going up and the treasury was making a packet (or should I say running a racket?) from building permits. Even today, the Central Bank still insists on trotting out the usual delusional tosh about Beirut being a desirable destination for Arab investment.
So the party is over. Should we be surprised? Not really. Lebanon really cannot really be expected to do any better. The country is only 71 years old and at no point in its short history, despite what we have been led to believe by the misty-eyed memories about once being the Switzerland of the Middle East, can it ever lay claim to a sustained period of continuity that has genuinely defined what it is. Lebanese history is a series of epochs, each determined by the region’s machinations rather than its own sense of destiny, and the same applies to its economy.
Lebanon is an idea and an attitude; but it is not a country. If Syria had its way, Lebanon would never have been created in the first place. Indeed, it, or parts of it, may not even be around 10 years from now if Bashar Al Assad ever feels cocky enough to emulate his tough ally in the Kremlin and do a spot of annexing of his own. It could happen.
In the meantime, there are two types of new homes in Beirut. Those that dominate the Saint George Bay skyline – the 400 square metre pieds-à-terre owned by Emiratis, Saudi Arabians, Qataris and Kuwaitis now too scared to live in them and which are a shadowy reminder of Lebanese hubris – and those that are too expensive for the average Lebanese to buy.
Emptiness and abandoned dreams is what it’s all about in Lebanon these days. Bella Casa may have been the first to throw in the towel, but I guarantee it won’t be the last.
Michael Karam is a freelance writer based in Beirut
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