Real Estate Trends

Even with the options of oil, businesses, tech, and any other form of investment, real estate has and always will be a choice many people will favor. Real estate is simple. It's as easy as spotting something you like and purchasing it for the means of retaining value. If you invest in real estate you are either choosing to make quick profit, or just want a steady stream of money to arrive at your front door every first of the month. Worst comes to worst, your property is empty and nobody wants to rent or buy it, then you get to keep it as an asset until someone comes along and takes it off your hands. Because someone is going to eventually come along and buy it from you, right? I mean when has someone ever NOT wanted a house? Or an office? Or land? When has a person ever NOT wanted to live somewhere? That is why real estate investment has been around centuries, because of its constant demand. In fact it is such a perpetual and popular practice that it has been around since the beginning of time. That isn't an overstatement either that is a fact, ever since the feudal system and the days of bartering have Kings and their disciples gone about the business of purchasing and trading lands for financial wealth. It's a commodity everyone in any time would want and need. We will eventually run out of oil, and technology is fast paced, one day your tech will become obsolete and a newer version would have already replaced yours. But land, and the value of it, will always be here to stay.

2008-2016

The 2008 property boom in Lebanon saw a lot of misguided trends in the sector. Around that time the local economy was flourishing because many in the region viewed Lebanon as an escape to the closed culture and lifestyle of the area. The country was seen as a more liberal mindset than that of its neighbors. Which is what would explain the abundance of tourist that washed over the country at the time. So as a natural counter response, businesses, hotels, and many other establishments went about catering to these tourists’ demands. Including the real estate sector. Tall towers with luxurious and spacious apartments were being developed catered towards the abundance of Emirates and Khaleejis presence in the country. Then things took a turn and when the foreign investment stopped, so did the demand for these properties. Since then, these properties have been moving slow on the market.

Taking notice to this, developers have shifted their production towards smaller units, better suited to meet local demands. The market shifted into a buyers market, where an excess of supply, allowed any potential buyer to take their time and choose from a batch of available properties. These properties did not leave much room for immediate investment because the profit margin was small and would be difficult to attain. Lets say you buy a house not to live in but to profit off of. Chances are flipping it, in todays market, would be pretty difficult because finding a buyer would be pretty difficult. Also, your profit margin, it’s not looking to good… It would be small because of the abundance of properties in the market. So any investment into property today would have been for the sole purpose of maintaining and/or accumulating value over time. Buy cheap, wait a while, sell right.

Fast forward to today…

When 2017 rolled around many in Lebanon became very aware of the socio/economic situation. The government had passed a bevy of laws and policies including the vote law, the tax reform, all while approving the budget law. All with the intention of getting the country functioning again. The atmosphere around the country was that it has been a difficult period but it was time to pick up and move on. Such affirmations were evident in many sectors. Banking had picked up, so did tourism, people actually started staying in hotels again. Lebanese, Emirates, Khaleejis, and Europeans all took up occupancy in Hotels as the Lebanese Mediterranean summer rolled around.

“Buy cheap, wait a while, sell right.”

First off, a real estate bubble is fueled by SPECULATION. SPECULATION is when people assume the value of something and begin to gamble on the fluctuation of that said value. Similar to stocks in companies, real estate speculation is when a lot of property is bought up from the market under the assumption that this property value will increase and will later be sold at a profit. With other factors at play, this spike in consumption leads to a bubble which eventually bursts when a lot of these properties are either dumped back into the market, or when the Banks come a callin’. Needless to say that is not the case in Lebanon because as mentioned before the market at the moment is a buyers one. No body is expecting the prices to dramatically increase so people are investing smartly and without haste. Imagine playing a hand of blackjack. Why ask for another card when your sitting on 19 and the dealers been dealing busts all night. So you play the table, i.e. the market, and you roll with the tides.

But there is more to it. The drop in prices does represent a shift in the market. It is after all the market, via supply and demand, that determines the prices. So prices will tend to fluctuate. And when they drop, it means many things. But to dismiss the occurrence as some sort of downfall of the whole sector is ridiculous, and stupid.

“These claims are solely aimed at targeting ones fear, their most primitive instinct, and to the uneducated, a string of big technical words may hold truth and spark the kind of emotional reaction these naysayers are aiming for.”

While properties in some areas have witnessed a small drop in prices, the property market has witnessed an overall improvement in number of recorded sales. The Real Estate Registry in Lebanon released figures indicating that in the first half of 2017 the number of property sales increased 12% to around 33,500 registered sales. What this means is that while prices may have dropped they have not dropped drastically, and people have shown that the need to buy property is still very much alive. If Tim Cook the CEO of Apple, woke up one day and decided “I want to drop prices on all Apple iPhones by 20%” which is very plausible. The other giant smart phone companies will all be quick to do the same. Sort of like a ripple effect. And in the after math of it all the whole smart phone industry witnesses an increase in the total amount of smart phones sold. Such a scenario would not be considered a “ state of panic”, far from it. This all goes back to what we addressed in Chapter 1 about perception, narrative, and the cup being either half empty or half full. In the sector today, what matters most are quantity and quality. It is far removed from the days of luxury and extravagance.

Onward and Upward

There is a point to be made here that goes overlooked in the eyes of many. When faced with a problem, any problem, on the other side of the spectrum is a solution. And while it may be easy to dispel the problem, the solution is still there to be taken. Real estate in Lebanon started off catering to a population, which was never here to stay. Since then, it has begun catering to the local needs and demands. But that is still only half the solution. There is real potential in the real estate sector. In life, much like todays market, if you maintain a shortsighted approach, opportunity will pass you by. The industry was moving off course when it was focusing on building towers that pleased no one in sight. It has since then been able to steer back on course. Now it has plateaued. But this plateau is only the beginning. The real estate performance curve is very similar to the construction of a building. At first you dig, and once you go down deep enough, there is nowhere to go but up.

In our next and final Chapter of this thread we will discuss the future of the sector. We will also give our educated prediction on what the future of the sector holds, in the sense of how developers will go about adjusting their product to the ever-changing market. Also we'll address where the market will head towards in terms of their needs and what type of properties they will demand.

Keep visiting our website for updates on properties and news thread as well as new cool features that will be introduced over time.

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