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Demand for residential real estate regresses in first quarter of 2016

BEIRUT |, with agencies - June 14, 2016, 07h45

Demand for residential real estate in Lebanon contracted in the first quarter of 2016, as reflected by the results of the Byblos Bank Real Estate Demand Index. Byblos Bank's Lebanon This Week reported that the Index averaged 42.5 points in the first quarter of 2016, representing a decrease of 12.5% from 48.5 points in the fourth quarter of 2015.

The results constitute the ninth steepest quarter-on-quarter decline on record and the ninth lowest level in 35 quarterly readings.

Further, the average monthly score of the first quarter of 2016 represents a decline of 67.6% from the peak of 131 points registered in the second quarter of 2010, and is 33.8% lower than the index's monthly trend average score of 64.2 points since the Index's inception in July 2007. The decline in housing demand in the first quarter of 2016 was reflected in the answers of consumers to the Index's survey questions, as 4.8% of Lebanese residents had plans to either buy or build a home in the coming six months, the ninth lowest quarterly percentage on record. In comparison, 7.2% of residents in Lebanon, on average, had plans to buy or build a house
in the country between July 2007 and March 2016, with this share peaking at 14.8% in the second quarter of 2010.

The Byblos Bank Real Estate Demand Index is a measure of local demand for residential units and houses in Lebanon. The Index is compiled, implemented and analyzed in line with international best practices and according to criteria from leading indices worldwide.
The Index is based on a face-to-face monthly survey of a nationally representative sample of 1,200 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 data segregates the Index
based on age, gender, income, profession, administrative district, and religious affiliation. The Byblos Bank Economic Research & Analysis Department has been calculating the Index on a monthly basis since July 2007, with November 2009 as its base month. The survey has a margin of error of ±2.83%, a confidence level of 95% and a response distribution of 50%. The monthly field survey is conducted by Statistics Lebanon Ltd, a market research and opinion-polling firm.

The results of the first quarter show that real estate demand in Lebanon continues to be significantly affected by the high level of political uncertainties, the slow economic growth environment and the low level of consumer confidence. Also, the still-elevated asking prices,
especially when compared to the income per capita of resident Lebanese, as well as job insecurity and declining work opportunities, are keeping local demand for residential real estate at low levels. Further, buying a house constitutes one of the most important investment
decisions for the Lebanese, and the value of a house is usually the single most important non-financial asset for resident Lebanese. As such, Lebanese households are postponing decisions to make this kind of investment in the prevailing circumstances. In parallel, market
dynamics have gradually shifted from a sellers' market prior to the fourth quarter of 2010 to a buyers' market since then, and this trend has solidified since 2014 as reflected by the Index's first quarter results.

The results of the Byblos Bank Real Estate Demand Index show that demand for housing was the highest in Beirut in the first quarter of 2016, followed by demand in the North, Mount Lebanon, the South and the Bekaa. Also, demand for real estate fell by 41.2% in the
Bekaa in the first quarter due to its residents' reduced appetite for building houses, and by 29.8% in the North due the drop in its residents' plans to purchase or build a house. Further, demand for real estate in Mount Lebanon regressed by 2% in the covered quarter, while it
rose by 6% in Beirut and by 6.2% in the South due to higher appetite for purchasing a house in both districts. In addition, real estate demand from people in three out of four income brackets regressed in the first quarter of 2016, while demand from households with an income of $2,500 or more per month grew in the covered quarter.

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