At first glance, it seems like all of Beirut is under development, as cranes and construction fill up the city with elaborate new commercial and residential projects in various stages of completion. At prime real estate sites all over Lebanon, a significant number of developers are promoting their ambitious projects – however, on closer inspection, they are not Lebanese firms, but GCC.
In a country where the average national wage is $900 (the official minimum wage is $200) per month, the well- worn complaint on the street is that the Lebanese are being priced out of their own property market by cash-rich buyers from the GCC.
This is mostly the case in Beirut and likely began in the post-war 1990s when the late Prime Minister Rafik Hariri – a long-time resident of the KSA and dual passport holder – attracted petrodollar investment to redevelop Beirut’s Central District, via the creation of the Solidere publicly-listed company. The firm’s plush creation – completely rebuilding Beirut’s central district – has arguably created anarea that few Lebanese can afford to live in; occupancy is estimated at 50 per cent.
The early 2000s also saw a massive wave of GCC investment in Lebanon. “The last two huge Gulf acquisitions in Lebanon were in downtown Beirut in the first half of 2006, with the Phoenician village and Beirut Gate. One was by a Kuwaiti group and the other was by an Abu Dhabi investment company,” says Raja Makaram, founder and managing director of Beirut-based Ramco real estate advisors, established in 1973. “These represented around 200,000 buildable square-metres each, and the acquisitions were made at around $250-300 million dollars each,” adds Makarem.
But others are of the view GCC investment in Lebanon now is as strong as ever. New developments, in Beirut especially, are visible everywhere and are largely being put up by GCC money and developers. “According to the IMF between 2002-2007, 60 per cent of foreign direct investment to Lebanon was from the GCC, with more than half of that in real estate. Lebanon also gets one third of all GCC foreign direct investment in the MENA region,” says Dr. Walid Hazbun at the American University of Beirut. More recent figures of GCC investment in Lebanese real estate, since 2007, “are likely higher.”
Today, some of the Gulf’s biggest developers such as Nakheel, Damac, Al Futtaim, to name a few, are highly visible in Lebanon’s real estate and development sphere – not including a previous wave of development in hotels which drew in big Gulf names, such as Habtoor and Rotana.
The result of Gulf-style projects in Lebanon for Gulf-buyers and a debatable numbers of Lebanese who can afford them, is questionable. “It’s transforming the image of the city as well as the living experience for everybody. In some ways it helps push the developments Solidere began in a more extreme and socially unfriendly direction,” says Hazbun. “The hotel district at the edge of downtown is not a very pedestrian friendly area to walk through. Without Gulf investment it’s possible it wouldn’t have completely gone in that direction. It might have been more mixed in terms of the kinds of developments and projects.”
Major GCC projects being built include Al Futtaim’s 60,000 sq. metre mall, in a Beirut suburb, and Emaar’s $800 million gated residential community in the mountains overlooking Beirut, called Beit Misk. DAMAC is building a luxury apartment building with interiors designed by Versace, in the Solidere development.
“The rate of usage of these properties is quite low,” says Hazbun referring to Solidere as an example. “They mimic projects in the Gulf, which of course mimic projects in other cities. Every evening how many people are living in them? You get tall buildings but you don’t get urban density.”
“We estimate that about half the people currently buying property in Lebanon are Lebanese expatriates, who have been working away, and want to secure a property to live in when they eventually return home,” says Niall Mcloughlin, senior vice president, Damac Properties. “We are also seeing strong interest from the Gulf, as people look to invest in a holiday home in Beirut.”
The starting price for an apartment in the DAMAC Tower in Beirut is$700,000.
Makarem says the Lebanese public have a distorted view of GCC investment: “There is a fallacy in the opinion of people here – there is an over exaggeration of Gulf interest in Lebanon,” he says. “After the war of 2006, there were some huge brakes put on Gulf investment in Lebanon, for political reasons.”
Despite attempts at contacting them, representatives from Al Futtaim and Emaar were not available to comment.
“There are strong economic fundamentals underpinning growth in Lebanon’s property market,” says Damac’s Mcloughlin. “The IMF is predicting economic growth of between four and five per cent this year, and the expanding economy is fuelling population growth, which is currently outpacing the supply of available accommodation. Increasing demand for housing is pushing up rental prices [in Beirut], which are now the highest in the Middle East.
“The real estate sector in Lebanon is underpinned by strong economic growth, a highly liquid banking system and strong demand, which is currently outpacing supply,” he adds.