I have been following real estate listings for a while now, on a daily basis. This is what I learnt:
Observations
- Most apartments that were put up for sale 6 months ago, are still for sale today. When real estate agents tell you the market is stagnant, it means they are not selling, not that the prices are stable, as they try to portray it.
- Prices are going down. Bank Audi's report noted about 4% decline in February... and an article in Dagpa Iqari stated it was a 5% decline. I am sure I wouldn't have been able to note the decline had it been that minimal.
- Real estate firms would increase the apartment price by an average of 2-3% - a random 'simsar' is likely to put as much as 50,000$ in his pocket. I guess the way it works is this: they ask the owner how much they want for the house, and anything more would be theirs. Whereas real estate firms seem to have a strict percentage they operate on.
- At some point I would look at the same apartment online, on 2 different websites and the price would vary by more than 100$/m, depending on the date posted (both by the owner).
Potential Reasons
- Businessmen found a big potential in the real estate field as the prices in Lebanon never fell before, and they had reached a poignantly high price. >>> The supply exceeded the demand, thus prices fell.
- The Lebanese economy (as well as the global economy) is agonizing >>> people cannot afford to pay those staggering prices for their apartments, thus prices fell.
- The real estate prices were initially over-valued >>> people refused to invest in them by fear of the bubble... and that would be the most dangerous hypothesis of all. It would mean that they will face a slippery slope and will significantly fall. There's actually an interesting article on Wikipedia on the speculated Lebanese housing bubble, it argues that 'property prices have risen exponentially since 2005 (an average 5-fold increase as of February 2010), while the GDP has risen only around 52% during the same period'.
Will we face a bubble burst soon, or is it a simple matter of supply and demand?
7 comments:
I wrote about this 2 years ago I think, and I think it should burst soon. When it does, I will buy a house.
I know, I read your post back then... and I stumbled upon it again now as I was looking up whether there were any material on the matter. I am not sure why it's not all over the media yet now though...
I wrote about it too a couple of years ago, I believe it won't burst because the whole sector is controlled in a mafia like way. And with the absence of regulations that can organize the sector abusers are thriving.
I hope it'll burst but it doesn't look like it's bursting anytime soon, it seems more like a small dip in prices before they pick up again. I hope I'm wrong, I'd love to think that I'll be able to buy a house one day. :)
You can write about it every year, Lebanon has a cycle for everything they do influenced by a few "leaders" decisions to make sure they fluctuate prices and benefit from their fall. Good luck!
Dear Youmna,
As a Management Consultant myself and a sworn valuation and estimation expert I will have to correct your article on 2 points:
1- if you had analysed the lebanese market throughly you would have noticed that the real estate bubble should have exploded a long time ago, but what maintained the industry is the Iskan bank loans that allowed people to take housing loans paid over 30 years at low interest rates creating more demand among the youth for this opportunity and thus pushing the prices higher, and now as most of the youth have bought apt and as the Iskan bank has run out of money in the last few months it is normal to c a stagnation in the market and thus a decline in price.
2- the real estate comission is of 5%, divided equally between the seller and the buyer, of course opportunists do exist , and some agents tend to put more weight on one side or another, but that is the default.
Plz Feel free to remove my comments after reading them and maybe using some of the info in a future article.
I am Samer Merhy " www.project-imec.com"
Specialized in France and the Netherlands, maybe we can exchange pointers sometimes.
Gd luck in yout squence quest
Dear Samer,
comments are 'additions' to a blog (you seem new to the concept) - I would never edit my text based on them, nor delete feedback, even when I tend to disagree.
1- A housing 'bubble' by definition is caused by 'home loans awarded more liberally, to borrowers with poor credit' - so really, you know the saying "fassara el ma2a bil ma2'? It means just that.
2- divide 5% by 2 - thank you. *applauds* However, this is not how a 'semsar' always works... and that's why I called it 'observations'.
I do appreciate the time it took you to write your comment though.
Have a great day,
Youmna
Dear Blogger,
1- that's why I wrote "future" article, and of course the opportunists...
2- Plz recheck your dictionary, a blogger that relates "by definition" a bubble to one circumstantial event can't be considered as a reference in the matter.
3- Thank you for the sarcasm, I wrote the previous comment in good faith and of course would have expected a more scientific approach from a presumed professional.
4- I asked you to feel free to remove my previous comment as a way to avoid this void muscle show.
Have a greater day
Samer
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