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Byblos: Real Estate Demand Index increased, but based largely on citizens expectations

Nov 17

Byblos: Real Estate Demand Index increased, but based largely on citizens expectations

The increase of the Index in the third quarter should not be viewed as a change in the current dynamics of the housing market,” cautioned Byblos Banks chief economist.

BEIRUT: The Byblos Bank Real Estate Demand Index posted a monthly average of 51.4 points in the third quarter of 2018, constituting an increase of 17.4 percent from 43.7 points in the second quarter of 2018.

Additionally, the Index decreased by 19.3 percent in July and by 4.2 percent in August, but increased by 26.3 percent in September, according to a Tuesday release from the Bank.

“The increase of the Index in the third quarter of the year followed the Lebanese Parliament’s vote in September to allocate LBP 100 billion, or USD 66 million, to subsidize interest rates on housing loans, given the suspension of subsidies since the beginning of the year,” Nassib Ghobril, Chief Economist at the Byblos Bank Group, said. “As a result, the new law raised the expectations of citizens that subsidized mortgages will resume, which triggered the jump of the Index in September.''

However, Ghobril cautioned that ”the increase of the Index in the third quarter should not be viewed as a change in the current dynamics of the housing market, as the improvement comes from a low base following the first and second-quarter results, and is only based on the expectations of citizens.”

Further, the Index’s average monthly score in the third quarter of 2018 is 61 percent lower from the peak of 131 points registered in the second quarter of 2010, and remained 53.2 percent below the annual peak of 109.8 points posted in 2010. Also, it was 14 percent lower than the Index's monthly trend average score of 59.8 points since the Index’s inception in July 2007.

The answers of respondents to the Index's survey questions in the third quarter of 2018 show that 5.8 percent of Lebanese residents had plans to either buy or build a residential property in the coming six months compared to 4.9 percent in the second quarter of the year and to 5.6 percent in the third quarter of 2017.

In comparison, 6.7 percent of residents in Lebanon, on average, had plans to buy or build a residential unit in the country between July 2007 and September 2018, with this share peaking at nearly 15 percent in the second quarter of 2010.

''Lebanese citizens need to see the recently-enacted law translated into concrete measures that will lead to the resumption of mortgage subsidies, in order to convert this pent-up demand into actual transactions,'' Ghobril noted.

He added that ''it remains the responsibility of the executive branch to not only cover interest subsidies on housing loans for limited-income citizens, but also to take the lead in developing a comprehensive housing policy that stimulates demand for all segments of the residential housing market in Lebanon.”

The Bank econ added, '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 Lebanese residents.'

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