Tuesday, August 31, 2010

A possible solution for the Lebanese Housing Bubble?

House prices in Lebanon keep rising up, we’re talking triple, x 4 or x 5 the price that it had 3 years ago, I wrote about this in February 2008, and things have only been getting more expensive and worse! Anyway, this thing over here has been referred to as Lebanese Housing Bubble (we all are waiting for it to burst sometime soon, and we will all be covered with gum?), you can read about the main reasons behind this bubble here (Wikipedia).

Two of the main reasons that led to this bubble are:
1-      Lebanese expatriates who are financially comfortable are buying houses back in Lebanon, and landlords are taking advantage of the potential buyers wealth
2-      Foreigners, mostly from the Gulf (meaning, REALLY financially comfortable), have also been buying a lot of villas in the Lebanese mountains with crazy prices indeed.

Where does this leave the Lebanese young person in his/her late 20s employee? Sitting there wondering how the hell he/she is going to save around 40’000$ as a first payment, for a 200’000$ house, that is barely 120sqm, and not built in a luxurious manner, not even close! Whereas the minimum wage in Lebanon is around 300$, and the average salary for someone who’s been working for 5 years is less than 1500$. Do the math please.

My suggestion is the following; two prices:
·         Price X which is affordable for Lebanese residents
·         Price Y which is X + W for foreigners, and the W goes to the government, this way there would be a control on the pricing (haha what a dream) that landlords set.

This way, the politicians in Lebanon can steal the money and have an even better life, I mean.. the government can benefit from this money to balance the country’s debt and invest in projects that create more job opportunities in Lebanon and open more business opportunities with other countries and improve the country (someone wake me up please…)

Oh, and how the hell are those landlords pricing their houses? Whatever happened to how old a building is, the facilities provided in the building (blu-ray in the elevator etc..), the luxurious items used to build it, the parking spots, the electrical doorway, the fancy concierge, the location of the house…

Everything seems to just be EXPENSIVE wherever and whatever it is!

Apparently, there seems to be a sort of similar problem in the UK.

Image courtesy of: TheFinancialHelpCenter.com

I would also like to share a comic that a fellow blogger/comic Sareen drew about that same subject a short while ago:
To view original post, please click here

15 comments:

  1. Just when i was thinking "yeah keep on dreaming..." i read (someone wake me up please…) hehehe
    Great post lil and great ideas! hope one day someone will listen =)

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  2. migheille, actually since the July 2006 war, the prices increased! so la2 lol ma badna war

    Rabih thanks :)

    Basho, feytin 7et :P w 7et ghaleh kamen lol

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  3. wont be enough and still it will be worst and worst if oil exploration will be starting in 2012.

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  4. Great post and ideas!!! Why aren't you in charge??? And this applies to rentals too. I have been looking for six month and the prices just keep on going up and up. But the bubble, like that in the UK and Dubai, will burst eventually :-)

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  5. hehe I love your suggestion, yet it's far from being practical. If it were to be forced, sales would just be put on hold.
    I would say it's not really a bubble. It's just pure economics, supply and demand. (I wish it was!) I heard prices should stabilize by next year... *fingers crossed*

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  6. As an foreigner living on a Lebanese salary with no family in Lebanon to back me up, life here is haaaaard..The housing bubble is one of the reasons I will never be able to realistically make a life for myself and my family here, which means that my time in Lebanon is limited..that's too bad. I really like it here.

    As long as foreigners and Lebanese expatriates are willing and able to purchase property in Lebanon, the prices won't go down, and that is the sad truth..unless there is an uprising of some sorts..hey, it could happen right?

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  7. The problem with that system is that it can be easily gamed. A Rich man can always "hire" a young person to "buy" an appartment for him, if he promised him to split the difference with him.

    So let's say: Foreign Rich Guy pays 400,000$ for apartment X, while poor Lebanese guy pays 200,000$ for the same Flat
    Rich guy can give poor guy 250,000$ to buy the apartment for him. Rich guy saves 130,000$. Poor guy makes 50,000$ profit, and government official who turns a blind eye makes a cool 20,000$.

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  8. Yeah Mustapha, but a person is allowed to only buy one house in his name. so a sacrifice that costs 50000$.. i donno, i do see the loophole though

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  9. The reason why property prices in Lebanon has risen (and still is actually) this sharply is simply because while there was a property boom all over the region, Lebanon was locked in political strife. I remember back in 2005 and 2006 I could still find decent apartments in West Beirut for the range of 150-200 dollars/SqM. What happened in the past 2 years is when the property bubble has literally burst (Dubai, Bahrain, Kuwait, Amman) the Lebanese sector was looking lucrative. Add to that the financial fundamentals of Leb economy (which contrary to what most like to believe are solid enough) and you get the picture.

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  10. I see, well it should burst or stabilize at one point. at least I and all the Lebanese hope so hehe

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  11. Liliane thanks for the referral to my cartoon!

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  12. ya 3alam hayde balad ma ba2a yin3ash fiya ya3ne iza fakar 7ata l wa7ad ye5od loan ma ba2a ye2dar 3a hal as3ar 3angad shi ma byen7amal

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