Price of Real Estate is determined by supply and demand

Land cost has absolutely nothing to do with the price at which you're able to sell your apartment, anybody with any formal training in economics or finance, would know that. In fact, it's the other way around. Housing prices are what determine land prices. The higher you can sell your apartment, the higher land prices go because of more people like you entering the sector. Of course, the reverse is true. If house prices fall, land prices fall, especially after some late entrant morons (those who entered the business in the last 10 years) who think they understand real estate. 

Cost of construction has absolutely nothing to do with the price at which you can sell. Cost of construction determines if you'll make money or lose money after you've finished construction. Price is determined by supply and demand. In short, if there are too many apartments and not enough people with cash to buy, prices drop. End of story

Why a pair of jeans costs triple in Lebanon

Price Transparency, Monopolies, and why a pair of jeans costs triple in Lebanon.

What is the one key factor that allows property developers to keep shafting the Lebanese consumer (other than his willingness to allow it)? It is the lack of price transparency. There is no reliable data in the market about what the "real" prices are, therefore your only source of data is the seller's word. The other related factor is collusion in the market. So they will all scream with one voice that prices haven't dropped (you've seen their comments in the press and on our page). Even when one of them, like Raja Makarem, breaks the "Thin Blue Line of Silence and Lies", by telling the truth that prices have dropped and that they're in trouble, they'll accuse him of being a liar.

This collusion leads to an effective monopoly, which is not different from how the Lebanese consumer is getting shafted in every other area.

Here's an example. This pair of jeans sells for $300 at the Sole Distributor (Wakil 7asri). If there's only one distributor, then he can price it at whatever he wants. So this guy sells it at $300 in Lebanon, where the per capita income is $600 per month, so it costs 1/2 a month's salary. In the US, where the per capita income is $4,600, it goes for $99 online delivered to your house, so it costs 2% of your monthly income.

In summary, there are advantages to capitalist systems in that competition provides low pricing and a variety of good products to consumers. There are advantages to socialist, or controlled economies, in that people get benefits such as free education, free medical care, retirement, free housing, etc. In Lebanon, it seems we have the worst combination of both worlds - expensive products, high taxes, and with no services, benefits, or infrastructure ... and no protection from the wolves.

And this is where we come in. Our mission is to provide the Lebanese consumer with the transparency to make an informed decision ... in other words, to protect him or her from the wolves.


ٍSource: Real Estate in Lebanon

Large Apartments vs Small Apartments (Part II)

Large Apartments vs Small Apartments (Part II)

You've read our post a few days ago in which we shredded the silly claim that large apartments have dropped in price, but smaller ones haven't. Today's post will pretend that this myth is true and analyze what it means.

Let's assume that large, expensive apartments have dropped in price or nobody is buying them anymore, while smaller apartments are being purchased, especially with Iskan loans.

Who are the buyers of the large apartments and who are the buyers of the smaller ones? We don't mean to be condescending here, but, all else being equal, I think it's not unreasonable to assume that, statistically speaking, the buyers of large apartments are older, richer, smarter, and/or more educated and knowledgeable (i.e. privy to more public and non-public information) than the buyers of smaller apartments.

In other words, smart money has now pretty much totally exited the real estate market, leaving only naive or less smart money which is still being conned and preyed upon by unscrupulous sellers and convincing them into taking out large loans and purchasing this overpriced junk that they can't afford.

Caveat emptor!


ٍSource: Real Estate in Lebanon

The Myth of Resilient Land Prices

The Myth of Resilient Land Prices

After a long period of denial that prices have dropped for ANY apartments, most people have now recognized that there has been a significant drop in prices. However, many of those same people who had been claiming that "prices in Lebanon do not drop" or "prices haven't dropped, there's just no buying and selling" and other such nonsense, have now changed their tune slightly. They're now claiming that large apartments have dropped in price, but small apartments have not. We've addressed this nonsensical claim in a previous post. There is another persistent myth about land prices. It goes something like this. Lebanon is a small country and there isn't much land, so while apartment and house prices can fall, land prices can never drop. The purpose of this post is to analyze that silly claim.

People who have studied real estate and who understand the science behind it, use a concept called "Best and Highest Use." So whenever you appraise a raw (i.e. With nothing built in it) piece of land, you appraise it by looking at the "best and highest use" for this piece of land. For example, let's say that you own a 3,000 sqm piece of raw land in the most expensive neighborhood in Solidere, Achrafieh, or Ras Beirut. Let's say you decide to build a huge statue for your grandfather Latif on this piece of land, with a nice garden around it, for your family to bring flowers and place at the grave of your grandfather Latif. If you make it a condition of purchase that this statue of Latif can never be knocked down (to make way for a high rise or mall or other commercial structure), then what is the value of this piece of land? This is rhetorical question. The value is pretty much around zero, albeit, your cousin Jamil might pay top dollar, because he was a fan of Gramps Latif. However, for most people, the value is zero.

So what is the best and highest value for this piece of land? The answer is a function of the regulations and zoning in this particular neighborhood, but the simple answer is related to how many floors and area of the building you can construct on this piece of land. Sometimes, this is referred to as "the price of air".

So let's say that you purchase a piece of land today. Knowing that the apartments in buildings that have been completed today cannot be sold and that there are hundreds more coming online every few months, it is pretty clear, that your building, which would be completed in 2-3 years, has zero prospect of being sold. Therefore, you would sit on this piece of land for the next 5-10 years, or worse, if you build, you'd have an empty building, haunted by ghosts, and degenerating every year, which will make you pay maintenance and other costs, without you seeing a penny for the next 5-10 or more years. Let's say you bought this piece of land for $10,000,000 cash. If you put the money in treasury bonds, at say 8.5% interest, your money in 10 years would be worth $23 million. On the other hand, if you had bought the land and sat on it for 10 years, you would just sit there incurring costs, with no return, especially if you build on it.

Therefore, mathematically, if there's no demand for finished apartments, then there's no demand for land and their prices would drop, along with everything else.

Finally, one thing amateurs don't take into account when they assess the size of Lebanon in making the silly conclusion that prices of land will always go up, are the loose zoning rules in this country, in which you can build 5-story buildings anywhere from Beirut to Anjar. What this means is that Lebanon is more like Singapore or Hong Kong (minus the infrastructure, 24 hour electricity, and rule of law). In other words, you can put 50 million people in it if you build all these junk buildings all over the country. By the way, if you have any doubt that land prices are dropping (and that there's no demand for them), just look at the bank ads offering to lend you money to purchase them. Why would banks, for the first time ever, offer loans on land, which is the riskiest real estate investment (for people who really understand real estate and not amateurs talking out of their BLEEP)?

ٍSource: Real Estate in Lebanon

Remember, if you believe it, it's not a lie

It is not enough that the developers and other owners of properties lie to the masses and fool them into buying.

It is not enough that Iskan, BDL, and banks provide easy facilities and subprime loans to make it easy for the masses to buy properties, while they suppress all transparency.

For the real estate scam to keep working, it is also necessary that buyers be a gullible bunch who believe such myths like somehow Lebanon is different from other economies, and that the average apartment in Beirut today being $588,000 is justified even while the per capita income is $7,000. They have to believe the nonsensical myths that prices in Lebanon do not drop. They have to believe this stuff for them to allow the seller to fool them into massively overpaying for this junk.

And this is where we come in. Our objective is to level the playing field and provide facts and information to save the Lebanese citizenry from exploitation by these unscrupulous sellers.

"Remember, if you believe it, it's not a lie."

George Costanza (from Seinfeld) on how to beat a Polygraph (lie detector).

"And if all others accepted the lie which the Party imposed—if all records told the same tale—then the lie passed into history and became truth. Who controls the past controls the future ... who controls the present controls the past."

George Orwell, 1984


ٍSource: Real Estate in Lebanon

Real Estate's Titanic

Some of our readers from the real estate sector, as you can see from their 'loaded' comments, don't seem to understand how Capitalism works, and believe that they should make a guaranteed 30% annual return on their capital, year, after year, after year, ad infinitum.

Here's how Capitalism actually works:

You deploy capital in a project. This capital is at RISK, which means that sometimes you make money, sometimes you lose money, with the expected annual return being X%, let's call it 30%, for now*. However, too many amateurs are crowding the sector recently, and those have never been in a recession or real estate slump, like the one in the 1990's. Therefore, today, when they've entered the beginning of a real estate slump, they're shocked and don't know what to do, so instead of lowering prices and making less money, or losing a little bit of money, they'll just hold on to the Titanic and sink with it. They'll just keep waiting for the hoards of Gulf tourists to come back, or the plane loads of expats from the so-called 7 million Lebanese in Brazil, who are all just dying to move back here (as if the reasons they emigrated in 1890 changed today), or the ones in Africa, who can't even transfer their depreciated local currency out of the country, or the ones in the Gulf, whose bonuses were slashed by 2/3 (proportionally to the drop in oil).

By the way, when we say beginning of the recession, we mean it. In a couple of years, you'll look back to today, which is the worst day of your life, as the good times.

Here's our advice to you: Sell now at any price or YOU WILL GO BANKRUPT.

For any of you still fooled by those charlatans, and contemplating buying today, just fast forward a few years and think about all the empty unsold apartments today, and all the ones in the pictures we posted (which are maybe 0.01% of the new supply coming in), and look at the state of the economy, and the geopolitical security situation, and try to guess which way prices are heading.

Oh, and one more thing. For the guy still constructing, instead of cutting his losses and exiting. When you see your colleagues with completed projects not being able to sell hardly any units, and having to massively lower their prices, WHAT ON EARTH ARE YOU THINKING?

* On a side note, and to show you their ridiculous assumptions, if someone made 30% a year for 30 years, $100,000 would turn into $262 million. So all anyone has to do is to take the money his parents would have paid for his college education, plough it into real estate development for the next 30 years, and retire with $262 million at 58 years old

ٍSource: Real Estate in Lebanon

Multiple Personality Price Disorder and the Schizophrenia of the Real Estate Sector

Multiple Personality Price Disorder and the Schizophrenia of the Real Estate Sector:

Let's say that you bought an apartment for $180,000 (the agreed price between you and the seller). You don't have ANY of the money, so he tells you that he'll "help" you, by signing a (fraudulent, illegal) letter that falsely attests that you paid 20%, so you can get an Iskan loan for 100% of the price you paid. This is what is called a sub-prime loan, by the way, which lead to the 2006 crash in the USA. To get the 100% loan, which is $180,000, you need the appraiser to write a (fraudulent, illegal) appraisal report that your apartment is worth $225,000. Then you go to register the apartment with the government. To evade taxes, the buyer and seller both lie to the government and say the apartment was bought for, say $90,000. After some haggling back and forth, and perhaps greasing some palms, the apartment is "determined" by the government to have been sold at $100,000, thereby saving you around 44% on your taxes. Finally, there's the actual market price, which this is the price that the smartest, most informed buyer paid in the last few months. This price is highly classified and hidden by the developers through the lack of transparency and collusion in the system. Let's call this price $150,000. Finally, there's our price, which is the projected price for this apartment in 5 years. And here it is: $80,000.

Here's the summary of all the prices on this one apartment:

Purchase Price: $180,000
Actual (smart buyer) Market Price: $150,000
Appraised Value: $225,000
Government Registry Price: $100,000
Our Projected Price: $80,000

ٍSource: Real Estate in Lebanon

ما هو الفرق بين ركوب سيارة أجرة وشراء شقة؟

ما هو الفرق بين ركوب سيارة أجرة وشراء شقة؟

حين تستدعي سيارة أجرة في هذا البلد، يتوقف السائق ويسألك: "إلى أين تذهب؟".
عندما تخبره عن العنوان الذي تنوي الذهاب اليه، ينظراليك من أعلى إلى أسفل. ثم يقرر:
"50،000 ليرة لبنانية"،  إذا كنت تبدو وكأنك أجنبي، وخاصة إذا كنت خليجي.
"40،000 ليرة لبنانية"، إذا كنت ترتدي رولكس (حتى ولو كانت تقليد) أو ترتدي ملابس جيدة أو تبدو وكأنك مغترب.
ويمكنك الوصول لتسعيرة 10،000 ليرة (على سبيل المثال) إن كنت تعرف المنطقة وتعرف كيف تفاوض. 

هذا المثال هو مثال واقعي لما يحصل عادة، وبشكل يومي لأي أحد يطلب سيارة تاكسي من الشارع في لبنان.

ما هي المشكلة هنا؟ المشكلة بشكل واضح هي غياب الشفافية.

ما هو الحل؟ الشفافية الكاملة عبر استعمال العدادات وعبرإعتماد تسعيرة موحدة و/أوعبر الدفع التلقائي عن طريق بطاقة الائتمان. من دون مفاوضات ولا تلاعب.

بالعودة إلى سؤالنا. ما هو الفرق بين طلب سيارة أجرة وشراء شقة في لبنان؟ الجواب هو لا شيء: هذا ما يحدث عند محاولة شراء شقة (بغض النظر عن حجم عملية البيع).

فإذا كنت ستشتري نقدا وانت ملم بوضع السوق العقاري و تعرف كيف تفاوض فستدفع أقل بنسبة 30٪ الى 40% من السعر الذي سيدفعه اي أحد لا يعرف حقيقة السوق. أما إذا كنت بحاجة الى قرض، وخاصة من دون دفعة أولى، (حيث على البائع أن يوقع على رسالة احتيال غير قانونية مدعيا أنك دفعت بالفعل 25٪)  فسوف يكون السعر الخاص بك أعلى بكثير (لنفس الشقة). وكلما كان "يساعدك" كلما زاد المبلغ الذي ستدفعه. وكلما ازدادت سذاجة المشتري فسيرتفع السعر الذي سيشتري به.

ما هو الحل هنا لحماية المستهلك؟ شفافية الأسعار. نشر جميع أسعار المبيعات حتى يعرف الناس بالضبط ما تم دفعه.

بالطبع، نحن على يقين ان الطبقة الحاكمة في لبنان لن تعمل على تحسين الوضع ولا المساعدة عبر إرساء الشفافية. بل على العكس، بعض أفراد هذه الطبقة يهمهم تغييب الشفافية لزيادة أرباحهم الخاصة. ذلك بسبب وجود تضارب في المصالح لدى بعض افراد الطبقة الحاكمة في لبنان، بحيث يملك بعض الزعماء والوزراء أغلبية المصارف وشركات العقارات الضخمة.

هنا يأتي دورنا، نحن نسعى لزيادة الشفافية في السوق العقاري عبر نشر الحقائق والدراسات العلمية...

Source:  Real Estate in Lebanon

Effect of Iskan interest rate's reduction

A lot of people have asked us about the effect of the interest rate reduction to 3%. Let's assume you're buying an apartment for $200,000. How many Lebanese have 20% or $40,000 down payment saved? So clearly, they have to borrow that as well. The mortgage payment on $200,000 for 30 years at 3% is $843 per month. Of course, you also have to add the building common charges, let's call them $100 per month and life insurance on the loan (which is usually mandatory), let's call that $67 per month. So your total monthly payment is now $1000 per month. The per capita income in this country is $587 per month and dropping since 2010 (see enclosure). Let's assume a working couple, so that's a combined salary of $1,174 per month. That means the monthly payment of a typical Lebanese family would take up 85% of their income, leaving them $174 per month to eat, pay their kids' tuition, buy their car, pay for gasoline, and occasionally go out.


ٍSource: Real Estate in Lebanon

Real Estate Bubble in Lebanon

Graph and Explanation of the major stages of an asset bubble, any bubble. Real estate in Lebanon is at the end of the denial stage, right before the bull trap.

ٍ
Updated link: https://realestateinlebanonfacts.blogspot.com/2017/05/Real-Estate-Bubble-in-Lebanon-updated.html


Source: Real Estate in Lebanon

Why Lebanese expats are absent from the Lebanese real estate market?

If people are wondering why Lebanese expats are now conspicuously absent from the Lebanese real estate market, which is causing its collapse to accelerate, here's some data:

Job cuts in Abu Dhabi are as follows:

-ADNOC: Over 5,000, up to 10,000

-ENOC: 1,000

-Etihad: 5,000

-ADIA: Over 1,000

-Etihad Rail: 1,000

-Abu Dhabi banks like NBAD, FGB, ADCB etc: Over 5,000 in the last 2 years. NBAD and FGB fired 2,000 this week.

-Emirates Airline has fired about 5,000

-Dubai banks have fired over 20,000 including DIFC in the last 2 years. At least half the banks have shut in Dubai/DIFC in the last 3 years like Lloyds, Barclays, RBS, ABN AMRO, Merrill Lynch, Soc Gen, Coutts etc. About 60 banks/companies shut in DIFC every year for the last 5 years. Total 360 plus companies have shut since 2006.

-Private players like Yahoo, Lukoil, Kraft Foods etc and more have fired over 100,000 and shut.

-Businessmen who have run away and the numbers are in excess of 3,000.

-At least 12 hotels have shut and every week 2 restaurants are shutting in UAE.

New taxes are being implemented on a monthly basis.....

Here is the flavor of today's FT article: https://www.ft.com/con…/2d7401f8-ec8f-11e6-930f-061b01e23655

Expats take flight as Abu Dhabi tightens purse strings

Austerity driven by low oil price prompts high-earning foreigners to quit the emirate

2 HOURS AGO by Simeon Kerr in Abu Dhabi

There are few bigger attractions for expatriates seeking a top-paying job in the oil-rich Gulf than the Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds.

But as Abu Dhabi implements a string of cost-cutting measures even Adia’s staff are starting to feel the pinch. Along with other government employees in the United Arab Emirates’ capital, they now have to pay their own utility bills, which in some cases can exceed $20,000 a year, and cover more of their medical expenses.

“The purse strings are tightening,” says a senior investment banker in the emirate.

Abu Dhabi, the UAE’s top oil producer and the wealthiest of its seven emirates, has long epitomised the petrodollar wealth of the Gulf — Adia manages assets estimated at $800bn. But government austerity measures now illustrate how the region’s leaders are being forced to take radical action in response to prolonged low oil prices and implement politically sensitive policies that were once considered a taboo in societies where government largesse has been the norm.

Living costs have soared as civil servants’ packages have been trimmed and electricity tariffs driven up in reforms to government subsidy programs. At the same time, delays to multibillion-dollar projects and spending cuts have triggered widespread redundancies, not least in the oil and gas sector. Adnoc, the state oil company, has shed 5,000 jobs in the past 18 months,

The result is the flight of expatriates who had descended on Abu Dhabi during the oil boom of the 2000s as the emirate embarked on an ambitious program to transform itself into a luxurious business and tourism destination.

“2016 was a nightmare, the worst year in three decades,” said a headhunter who recruits for senior positions in the emirate. “The top and bottom end of expats are on their way out, leaving a squeezed middle, rather like in the 1980s and 1990s.”

The highest paid European general managers were leaving and being replaced by cheaper staff, he said.

Projects valued at $81bn have been put on hold while others worth $69bn are continuing, according to the Middle East Economic Digest, a business intelligence provider. Those delayed include some showpiece plans, including a Louvre museum on Saadiyat Island that was supposed to begin welcoming visitors in 2012. Contracts for the Zayed National Museum and Guggenheim, which are also integral to Abu Dhabi’s efforts to become a regional cultural hub, have yet to be tendered.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, says: “The economy is very much driven by government, state-related entity spending, and the focus has been on fiscal consolidation and adjusting to the lower oil price environment.

“There has been a marked slowdown in economic activity, and the focus will probably remain on further adjustment albeit at a weaker pace in 2017.”

Fitch, the rating agency, says Abu Dhabi government spending shrank 10 per cent last year and 18 per cent in 2015, slowing non-oil GDP growth to 3.5 per cent last year from 7.6 per cent in 2015.

The government has also sought to raise revenues to bolster its coffers.

Electricity prices for expatriates rose 30 per cent this year, while Emiratis’ power and water tariffs, which are lower, were increased by 34 per cent. It was the third year running that such raises were imposed. A sales tax is due to be introduced in the UAE and other Gulf states for the first time in 2018.

Foreigners are also being hit by a new municipality tax of 3 per cent on annual rent, backdated to February 2016.

“You feel the impact from the slowdown and rising costs, with people leaving or sending their families home — there are empty houses in my compound for the first time in many, many years,” says an Abu Dhabi-based banker.

More job losses are expected as the government looks to rationalise its diverse range of affiliated companies. Bankers estimate there could be more than 2,000 job losses caused by the merger of National Bank of Abu Dhabi and First Gulf Bank, including a cull of expensive senior management and cuts across the national branch network.

Mubadala and Ipic, the Abu Dhabi state investment firms, are also being merged in another cost-saving measure.

Ripple effects are being felt across the emirate. Dentists complain that families are no longer opting for as many expensive procedures, such as brace fittings for children.

“They are already calling it the Adia effect,” the investment banker adds.

Situation is so grim that a company owned 50% by the Ruler of Dubai and 50% by the Ruler of Abu Dhabi shut a plant in UK and did not pay salaries or benefits to over 200 employees in UK and now the unions are pressuring for a hearing in the UK Parliament!

Gone are the days of excess when they used to spend tens of millions for the sake of reputation and no one used to care!

Counting pennies is the NEW NORMAL in the GCC!

Dubai Firm Leaves Britain Without Paying Staff

http://www.morningstaronline.co.uk/a-b50c-Dubai-firm-leaves…

Businesses owned by the richest Arab billionaire who is richest in the world are also collapsing.

Saudi billionaire Prince Alwaleed’s Al Arab channel closes down

http://gulfbusiness.com/saudi-billionaire-prince-alwaleeds…/

Media and newspapers are shutting regularly due to lack of business.

UAE newspaper 7Days closes down

http://gulfbusiness.com/uae-newspaper-7days-closes/

EXCLUSIVE: UAE’s Radio 1 and Radio 2 close, entire workforce laid off – source

http://gulfbusiness.com/uaes-radio-1-radio-2-cuts-entire-w…/

Thousands of people have run away leaving their cars behind.

Fines and dust build up on vehicles abandoned at Abu Dhabi airport

http://www.thenational.ae/…/fines-and-dust-build-up-on-vehi…

Iconic restaurants have shut.

Jumeirah to close two restaurants at Emirates Towers Boulevard - Harry Ghatto's and Tokyo @Towers

http://www.arabianbusiness.com/jumeirah-close-two-restauran…

Jumeirah Restaurant Group to close The Ivy Dubai

http://www.hoteliermiddleeast.com/28670-jumeirah-restauran…/

Two iconic Dubai Souq Al Bahar restaurants closing down

http://whatson.ae/…/05/souq-al-bahar-restaurants-closing-d…/

Pacha Dubai to close for good?

http://whatson.ae/dubai/2016/06/pacha-dubai-close-good/

Here is the latest list of cars that have been abandoned in Dubai but no one is allowed to publish it.

Most are sold at a price below 1,000 dirhams (because there are no buyers) and no one is allowed to write reports in any newspapers. These cars get deleted and updated on a daily basis. There are houses in Fronds of Palm Jumeirah, malls across UAE and many other interesting things.

http://www.emiratesauction.com/en/Cars/OnlineAuction.aspx

Meanwhile, hotels are collapsing and offering entire buffets in 5 star hotels for less than a cup of coffee in those hotels!

This gradual collapse has continued since Jan 2015 and should create a peak collapse sometime in 2017 with no hopes for any upward recovery in 2018.


ٍSource: Real Estate in Lebanon

Why Real Estate Developers can't wait?

This post is useful for everyone but is mainly dedicated to real estate professionals. Many people in the market say that almost all developers are flush with cash (not true, by the way) and can wait 10 or 20 years without selling until they get their price, let's call it $100,000 for an apartment.

So, here's a pop quiz:

Let's say that a developer waits 20 years and finally is able to sell his apartment at $100,000. Did he win? So at an average inflation rate of, say 5%, what is the value of $100,000 in 20 years, in today's dollars?

Drum Roll ......

The answer is: $37,688.

Here's another pop quiz:

If this same genius reduced his price from $100,000 by 1/2 and sold today at $50,000, and then reinvested the $50,000 for 20 years in Lebanese Treasury bonds paying an 8.5% coupon, what would he have in 20 years?

Drum Roll ......

The answer is: $255,602

This is what happens when people with no finance training or simple Math skills decide to become real estate investors. When all they do is rely on the lack of transparency in the market to fool people into overpaying. I guess now they have to go back to school and refresh themselves on Time Value of Money and how to use a financial calculator.

3rd Pop Quiz:

If you have $1 million in cash should you buy an apartment today for $1 million or rent it for 2% of its price and reinvest the money?

Answer: If you reinvest the money at the above 8.5%, subtract 2% a year for the rent, and reinvest the 6.5% left, you would end up with $3.5 million in 20 years, which allows you at the end of that period to buy 3 apartments in Beirut like the one you would have bought today for $1 million (even assuming it doesn't drop), and a huge $500,000 villa in Shtoura, for your mother-in-law, AND, you would have lived for free for the whole 20 years.

Any questions?


ٍSource: Real Estate in Lebanon

ما هي اسباب الإنهيار المتوقع للقطاع العقاري؟ - الجزء الأول

لماذا سيستمر التخفيض في أسعار العقارات؟

نسمع خلال هذه الأيام الكثير من الأقاويل الغير منطقية التي تتناول موضوع القطاع العقاري في لبنان. هذا المقال مخصص لدحض  مقولة أن أكثرية المطورين العقاريين يملكون الكثير من المال (ليس صحيحا) ويمكن أن ينتظروا 10 أو 20 عاما دون بيع الشقق التي يملكونها، حتى يحصلوا على السعر الذي يناسبهم. هذه المقولة ساذجة وغير مبنية على منطق علمي ومالي سليم.   

دعونا نأخذ على سبيل المثال سعر 100,000$  للشقة.

سؤال 1: دعونا نقول أن المطور ينتظر 20 عاما، وأخيرا يستطيع أن يبيع شقته ب 100,000$ . هل فاز؟

الجواب: كلا. بعد 20 سنة ستفقد ال 100,000$ من قيمتها الشرائية بسبب التضخم، لتصبح مساوية ل 37,688 $ (اعتمدنا 5% كمعدل للتضخم السنوي).

سؤال 2: إذا خفض هذا البائع سعر الشقة من 100 ألف دولار إلى النصف وبيعت اليوم بسعر 50 الف دولار، ثم أعاد استثمار 50 ألف دولار لمدة 20 عاما في سندات الخزينة اللبنانية، التي تدفع قسيمة 8.5٪، ماذا سيكسب في 20 عاما؟

الجواب هو: 255,602 $

وهذا ما يحدث عندما يقرر الناس الذين ليس لديهم خبرة في اسهل اسس علوم المال والرياضيات أن يصبحوا مستثمرين عقاريين. عندها كل ما يفعلونه هو اللجوء الى خداع الناس للشراء بأسعار مبالغ بها مستغلين غياب الشفافية في السوق العقاري. ولكن ليس لوقت طويل لأنه اصبح معلوماً أن الأسعار إنخفضت (وبدأت تنهار) واصبح من الأصعب إستغلال الناس من جهة وانخفضت القدرة الشرائية للناس والطلب على العقارات من جهة أُخرى.

لذلك سيستمر المطورون العقاريون بتخفيض الأسعار لمحاولة بيع (بأي ثمن) قدرالمستطاع ما يملكون من عقارات للتخفيف من خسائرهم. هذا احد أسباب الإنهيار الكامل الذي سيطال القطاع العقاري في لبنان (الأسباب الأخرى سنتكلم عنها في مقالات لاحقة).

Source:  Real Estate in Lebanon

The Myth of Large Apartments versus Small Apartments

The Myth of Large Apartments versus Small Apartments:

After a long period of denial that prices have dropped for any apartments, most people have now recognized that there has been a significant drop in prices. However, many of those same people who had been claiming that "prices in Lebanon do not drop" or "prices haven't dropped - there is just no buying and selling" and other such nonsense, have now changed their tune slightly. They're now claiming that large apartments have dropped in price, but small apartments have not. The purpose of today's post is to analyze this silly claim.

Let's call a large apartment 200 sqm or more, and a small apartment, anything smaller than 200 sqm, and for the purposes of this illustration, let's use 150 sqm. You don't have to use 200 & 150; the logic is the same for any pair of numbers that you choose. Let's say that prices in this building are $2,000 / sqm and both apartments are on the same floor. The price of the 200 sqm apartment is $400,000 and the price of the 150 sqm is $300,000 (price proportional to its size). Let's say that the 200 sqm apartment has now dropped by 25% (the number used by Mr. Makarem in an article we posted before) and let's say that the 150 sqm apartment has stubbornly remained the same. So, now the 200 sqm apartment is selling at 25% less which would be $300,000, while the owner of the 150 sqm is still stubbornly demanding $300,000. You're a potential buyer whose budget is $300,000, allowing you to (originally) buy the 150 sqm, but not the 200 sqm, but today both the 200 & 150 sqm are selling at $300,000. Which one do you now buy? Obviously, the 200 sqm, and the demand for the 150 sqm disappears while people at the 150sqm level clean out the 200 sqm inventory. As you can see, there is no way mathematically for a 200 sqm apartment to drop without the category below it dropping as well.

Of course, there are distortions in the market caused by Iskan and BDL's misguided policy to allow subprime loans for small apartments (with no money down). The seller here, by "helping" the buyer through signing a fraudulent letter (stating that he paid down 25%), will now exploit the naive buyer and make him overpay (using Iskan money). There are also distortions in the market because, normally, buyers of the larger apartments are sophisticated and informed and will not allow the seller to scam them into overpaying (anymore). Therefore, there's no question that buyers of the smaller apartments are paying way more than they should. This does not mean prices at lower levels didn't drop - it just means they're being conned into overpaying. If you're a cash buyer and an informed, sophisticated buyer of a small apartment, you will get a 30% discount - no question about it. If you're an uninformed, naive buyer using Iskan 100% loan (with no money down), you will overpay. That's life.


ٍSource: Real Estate in Lebanon

What's the difference between hailing a taxi and buying an apartment?

What's the difference between hailing a taxi and buying an apartment?

So in this country, you call a cab. He stops.
 "Where are you going?" He says.
"Dekwaneh"
He now eyes you from the top down.
 "50,000 LL," he says, if you look like a foreigner, especially a Khaliji.
"40,000 LL," he says, if you're wearing a Rolex (even a fake one) or well dressed or look like an expat.
Now you start negotiating.
"No, 1,000 LL"
"Ok, 20,000"

And finally, you settle on 12,000 LL. You give him 20,000 LL. He says, "Sorry, I have no change," here expecting you to part with the 8,000 LL.

What's the solution to this problem? Uber. Total transparency. Clear pricing. No negotiation. No change. Automatic credit card payment.

So back to our question. What's the difference between hailing a taxi and buying an apartment? The answer is nothing. This is, more or less, what happens when you try to buy an apartment, with some appropriate modifications in the parameters. If you're a cash buyer, you'll pay 30% less. If you need a loan, especially with zero down payment, where he has to sign a fraudulent, illegal letter claiming that you already paid the 20% down, guess what? Your price will be 20% or higher. The more he "helps" you, the more you'll pay.

What's the solution here to protect the consumer? Price transparency. Publish all the sales prices so people know exactly what has been paid.

ٍSource: Real Estate in Lebanon

أسطورة الشقق الكبيرة مقابل الشقق الصغيرة

أسطورة الشقق الكبيرة مقابل الشقق الصغيرة:

وبعد فترة طويلة من إنكار ونفي الأنخفاض  في اسعار الشقق، أقر معظم الناس الآن بأن هناك انخفاضا كبيرا في الأسعار. ومع ذلك، فإن العديد من هؤلاء الأشخاص الذين كانوا يدعون أن "الأسعار في لبنان لا تنخفض" أو "الأسعار لم تنخفض -انما ليس هنالك اي شراء او بيع" وغيرها من مقولات، قد غيروا الآن ادعائهم قليلا. انهم يدّعون الآن أن الشقق الكبيرة قد انخفض سعرها فعلاً، ولكن الشقق الصغيرة حافظت على اسعارها.

 الغرض من مقال اليوم هو تحليل هذا الادعاء السخيف.

على سبيل المثال، دعونا نعتبر أن الشقة الكبيرة حجمها 200 متر مربع أو أكثر، والشقة الصغيرة أصغر من 200 متر مربع، ولأغراض هذا التوضيح، دعونا نستخدم 150 متر مربع كحجم لشقة صغيرة (ليس من الضروري استخدام 200 و 150؛ المنطق هو نفسه لأي زوج من الأرقام التي تختارها). لنفترض أن الأسعار في هذا المبنى هي 2000 دولار / متر مربع وكلتا الشقتين في نفس الطابق. سعر شقة ال 200 متر مربع هو 400،000 $ وسعر شقة ال 150 متر مربع هو 300،000 $ (استعملنا نفس السعر للمتر المربع).

 دعونا نعتبر أن شقة ال 200 متر مربع قد انخفض سعرها الآن بنسبة 25٪ (النسبة التي تحدث عنها السيد مكارم في مقال كنا قد نشرناه من قبل) ودعونا نعتبر أن شقة ال 150 متر مربع لم يتغير سعرها (كما يحاول ان يسوق البعض). لذلك، الآن شقة ال 200 متر اصبح سعرها 300،000 $، في حين أن مالك شقة ال 150 متر مربع لا يزال يطالب بعناد ب 300،000 $!!! لنفترض انك المشتري المحتمل الذي تبلغ ميزانيته 300،000 دولار، التي كانت تسمح لك أصلا بشراء شقة ال 150 متر مربع، (ولكن ليس ال 200 متر مربع) ماذا ستشتري الان؟ شقة ال 200 متر التي اصبح سعرها 300،000$ بعض الانخفاض او ستشتري شقة ال 150 متر التي لم ينخفض سعرها وبقي 300،000$؟

من الواضح أن شقق ال 200 متر مربع ستباع بسرعة اكبر في هذه الحالة، ويختفي الطلب على شقق ال 150 متر مربع, في حين أن الناس اللذين كانوا قادرين ان يشتروا شقق ال 150 متر مربع سيشترون شقق ال 200 متر مربع. كما ترون، لا توجد طريقة منطقية و علمية لخفض سعر شقة ال 200 متر مربع دون خفض سعر الشقق الاصغر حجماً.

بطبيعة الحال، هناك تشوهات في السوق تجعل بعض الذين يشترون الشقق الصغيرة يدفعون أكثر مما ينبغي، فإذا كنت مشتريا ساذجا "لشقة صغيرة" غير مطلع على حركة السوق سوف تدفع مبالغ زائدة. وأذا كنت مستخدم لقرض إسكان بنسبة 100٪ (عبر الاحتيال بالاشتراك مع البائع لعدم دفع دفعة اولى)، فسيخدعك البائع ليجعلك  تدفع مبالغ زائدة مقابل "مساعدتك" على الاحتيال لشراء الشقة الصغيرة. هناك أيضا تشوهات في السوق لأن عادة، الذين يشترون الشقق الكبيرة هم أكثر اطلاعا ولن يسمحوا للبائع بخداعهم من خلال لعبة المساعدة/الدفع الزائد (بعد الآن).

إذا كنت  من المشترين نقدا او من المشترين المطلعين على حركة السوق، وتريد شراء شقة صغيرة او كبيرة، سوف تحصل على خصم 30٪ واكثر (الخصومات وصلت الى 40% في بعض الحالات) - لا شك في ذلك.

Source:  Real Estate in Lebanon