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Byblos Bank launches Real Estate Demand Index for Lebanon

BEIRUT | - November 22, 2015, 10h14

Byblos Bank launched the Byblos Bank Real Estate Demand Index for Lebanon, constituting the first initiative of its kind in Lebanon and the Arab World. The Byblos Bank Real Estate Demand Index is a measure of local demand for residential units and houses in Lebanon, with November 2009 as its base month, Byblos Bank ‘Lebanon This Week’ reported.

The Index calculation started in July 2007 and is produced every month. The data segregates the Index based on age, gender, income, profession, region, and religious affiliation. The Index calculation is based on a nationally representative survey of 1,200 face-to-face interviews with adult males and females living throughout Lebanon, whereby residents are asked about their plans to buy or build a house in the coming six months. The monthly field survey is conducted by Statistics Lebanon, one of the leading opinion polling firms in the country. The firm draws a random sample of the population for each monthly survey.

The Index's results show that real estate demand started to increase tangibly in 2008 and accelerated in 2009 and 2010, with the Index increasing by nearly 80% during this timeframe. The Byblos Bank Real Estate Demand Index posted an average monthly value of 60.1 points in the second half of 2007, and rose to 73.8 in 2008, 99.8 in 2009 and 108 in 2010, the highest annual value on record. However, the Index fell by 40.2% in 2011 to 64.6 and by an additional 33% to 43.3 in 2012. It then rose to 51.5 in 2013, reached 35.6 in 2014, and 40.3 in the first nine months of 2015.

The cycle of real estate in Lebanon between July 2007 and September 2015 is divided into five stages. The first stage lasted from July 2007 until April 2008 and was characterized by frequent security breaches, a presidential vacuum, political tensions and government paralysis. The Index averaged 56.7 during this stage, the third highest value among the five stages.

The second stage, which saw the sector booming, stretched from May 2008 to August 2010 and was driven by the resulting positive momentum from the Doha Accord, by political stability and proper security conditions, by a high level of consumer confidence, by lower interest rates on mortgages and by supportive overall economic conditions. In addition, real estate prices increased during this period as market expectations pointed to further increases in prices. In addition, amateur developers and speculative investors entered the market during this timeframe. The Byblos Bank Real Estate Demand Index posted an average monthly value of 101.1 during the boom period, reflecting a 78.3% increase from the preceding stage.

The third stage ranged from September 2010 to July 2012 and saw the beginning of the slowdown in market demand. It was characterized by high real estate prices, political tensions, the start of the Syrian conflict and deteriorating domestic economic conditions. The Index fell by 38.8% from the previous period to a monthly average of 61.9, the second highest value among the five stages.

The fourth stage ushered-in the stagnation in demand and lasted from August 2012 until December 2013. It was characterized by political instability, the intensification of the Syrian conflict, the deterioration of domestic security conditions, a significant decline in consumer sentiment and weak economic activity. On the positive side, the Central Bank introduced its first stimulus package for 2013 with about 50% of the available funding directed to support residential real estate. The availability of funding at reduced interest rates provided support to domestic demand and prevented it from further declining. Still, the Index averaged 48.7 per month and dropped by 21.2% from the preceding period, constituting the second lowest reading among the five stages.

The fifth stage, which saw the deepening of the market's stagnation, started in January 2014 and is still ongoing. It is characterized by a high level of political uncertainties, the start of the presidential vacuum, poor economic and security conditions, institutional paralysis, the lack of prospects for ending the Syrian conflict, declining job opportunities and increasing job insecurity. The Index maintained its downward trend and fell by 22.8% from the previous period to a monthly average of 37.6, the lowest average score among the five stages. Overall, the Byblos Bank Real Estate Demand Index fell by 62.8% between the boom period and the period of deep stagnation.

#RealEstate, #RealEstateDemandIndex
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