Real estate market in Lebanon, real demand or a possible bubble? -

Abstract

This paper evokes the real estate prices in Lebanon, as since 2005, prices have risen significantly and provoked a big lag between the purchasing power of citizens and real estate prices. It addresses the notion of bubbles in general, underlining their characteristics, then presents some of the bubbles that happened to the real estate sector in the region and worldwide. Bubble bursts are then depicted while showing their plausible reason. A study of the Lebanese case is then conducted, while stressing on various microeconomical and macroeconomical factors that reflect the variation of the real estate prices in Lebanon. Afterwards, a presentation of the real estate prices in Ashrafieh area (Which variation is similar in the whole Lebanese territory), is done from 1998 until 2014, and a bubble check test is conducted (GSDAF test according to PSY(2011)). The test result shows two bubbles in the pricing of real estate in Lebanon, one in 2005 and the other in 2008. While accounting for the inflation and stagnation of prices prior year 2005 hikes, country’s risk premium, it can be concluded that other factors need to come along with the real estate prices such as income, rent, …