A weekend topic starting with two reports from Executive Magazine. "Coming into 2018, Lebanon’s real estate market was already sputtering. The first wave of concerns was voiced by developers of luxury units. Property sales in this uppermost segment began slowing down around 2011, creating a glut of luxury-grade apartments that industry insiders estimated at a value of no less than $3 billion."

"The mid-segment of the market came next, with a drop in the sale of $300,000 to $500,000 apartments, which mostly cater to Lebanese expats. Sales performance of that portion of the market began dipping in 2015. The central bank’s decision to close the spigot financing home loan subsidies—a near $2 billion market segment—has brought the market to a standstill."

"Executive spoke with six developers and real estate asset management firms in September for this report. All of them agreed that today’s demand for housing is practically zero."

"According to Abdullah Hayek, CEO of construction and real estate services firm Hayek Group, the downside of the boom was an invasion of unprofessional developers. 'They started building the way they wanted to but not the way they should have,' he says. 'Most of them, since they are not professional, bought the wrong land, used inadequate designs and specifications, and incurred higher costs, and therefore wanted to sell at higher rates. That’s why we have a lot of vacant apartments these days. Those apartments were built in that interval.'"

"There have been visual cues that the property market is in a depression, more easily seen in the middle and upper class neighborhoods of Beirut. Walk around the city at night and you’ll see story after story of unlit, seemingly empty, apartments. During the day, the for-sale and for-rent signs tell the same story: There are a lot of vacant apartments in Lebanon’s capital."

From Middle East Online. "Dark apartment windows vastly outnumber the lit in the quiet night streets of Beirut's waterfront and central districts, a reminder of Lebanon's long economic and real estate slump. In a typical example given by one estate agent, the owner of a penthouse apartment in a bustling part of central Beirut this summer dropped the asking price to $2.5 million, having tried unsuccessfully for three years to sell at $3.5 million."

"Up to 4,000 new luxury apartments lie unsold around Beirut, local real estate advisers Ramco said, and banks have been re-scheduling troubled loans, real estate and banking sources said."

"This is where the fund, Legacy One, hopes to have an impact, by tapping into demand among Lebanese diaspora wanting a connection to their homeland, at lower prices and with easy investment. Namir Cortas, head of the Real Estate Developers Association of Lebanon, said Legacy began by scouting unsold properties around $2 million, but is now looking in the $500-600,000 range and potentially lower."

"Legacy Central Chairman Massaad Fares said the developer of a typical 30-apartment building in Beirut might have had 20 unsold for a couple of years, owe a bank around $10 million and need another $1 million to finish construction so existing customers can move in. 'The bank is pushing him and he needs the money. The developer is really in a challenging position and we come in to save him,' he said."

The Asia Times. "Real estate prices in Lebanon freeze or rise, but never fall. That has long been the commonly held view of the sector in this small country on the Mediterranean, long a prime destination for Arabs and the Lebanese diaspora for its mountains and beaches."

"It was only rational for investments in this services-based economy of limited exports and high imports to be directed mostly towards properties, which have guaranteed profits almost every time. That trend may be ending."

"In February, the IMF warned that Lebanon’s economic situation was 'fragile.' 'The traditional drivers of growth in Lebanon—tourism, real estate, and construction—remain slow and a strong rebound is unlikely soon,' the fund said, citing central bank figures that real estate prices declined by more than 10% in 2017."

"Between the years 2007 and 2011, the Lebanese real estate market was undeniably thriving. However, over the past few years the mythical sector known to subsume and multiply any amount of money thrown its way has been facing increasingly complicated difficulties."

"Between 2007 and 2010, around 60% of foreign investments to Lebanon were going to real estate and most of that money was coming from the Gulf. The slowdown of the sector began in 2011, with growth in prices decelerating through 2013, followed by a massive fall in demand in 2015."

"Once investments from the wealthy Gulf states began to diminish, real estate developers found themselves standing on thin air, surrounded by mostly high-end luxury and commercial buildings that very few Lebanese citizens could dream to afford."

"The national Banque du Liban (BdL) in January of this year introduced housing loans with subsidized interest rates as part of a series of stimulus packages. The stimulus packages included a 278% increase in housing loans and a 112% increase in construction loans. The aim was to give the real estate sector the push it needed to keep the market from crashing."

"The January stimulus allotted 750 billion Lebanese lira (US$500 million) to cover the population’s housing loan needs for 2018. To the surprise and dismay of the public, by March the package was declared to have been depleted."

"Lebanon now faces a deadlock. Whichever move the government and BdL make – or don’t – will potentially induce some sort of crisis. 1) Issuing a stimulus package in Lebanese Liras will increase inflation and BdL will lose grip on its famous peg to the dollar (1,500L.L =$1)."

"2) Issuing it in US dollars means it will dip into its dollar reserves which it requires in order to secure the currency value. Already suspected to be at risky levels, that also will mean it loses grip on the peg."

"3) Not issuing a package at all would mean that people will not be able to purchase properties and the market fails."

"The fall of the real estate sector will also put the banking sector, and thus the government at risk. According to the IMF, around 90% of the banking sector’s investments are in the real-estate sector."

"The Lebanese economic model is a full loop: the banking sector invests in government debt to the extent that its share is approximately 60%. In turn, the real-estate sector depends on loans from banks for both construction and buying and selling houses. If the real estate sector was to fall into crisis, the banks would follow suit."

"The history of the Lebanese economy has marked by the capacity to continuously defer crises, but it is possible it may no longer be capable of delivering this master function."

"The government can no longer sustain a constant debt accumulation for the banks to invest in. The real estate sector is no longer a viable investment given foreign demand has diminished and the locals can neither afford to purchase properties nor to accumulate any more private debt, as both remittances and gross national income per capita are decreasing annually."