BEIRUT: The Byblos Bank Real Estate Index reported a sharp decline for the first quarter of 2018, according to a statement issued by the bank on Wednesday .
The Index posted a monthly average of 33.2 points in the first quarter of 2018, constituting a decline of 26.1 percent from 44.9 points in the fourth quarter of 2017 and a decrease of 23.7 percent from 43.5 points in the first quarter of 2017.
The first-quarter results constitute their lowest level since the second quarter of 2015 and their third lowest level in 43 quarterly readings.
Further, the Index’s average monthly score in the first quarter of 2018 came 74.7 percent lower from the peak of 131 points registered in the second quarter of 2010 and remains 70 percent below the annual peak of 109.8 points posted in 2010. Also, it is 45 percent lower than the Index's monthly trend average score of 60.3 points since the Index’s inception in July 2007.
Nassib Ghobril, Byblos Chief Economist, said: "Demand for housing in Lebanon declined sharply in the first quarter of 2018 due to the suspension of interest-rate subsidies on housing loans at the beginning of the year.”
''Banque du Liban, in cooperation commercial banks, has subsidized interest rates on housing loans since 2009 through various measures and mechanisms,” said Ghobril, adding, “The subsidies were supposed to be temporary in order to give the executive branch time to develop a housing policy. But the successive governments took these measures for granted, as they assumed that the subsidies would continue indefinitely.”
The economist noted that both citizens and the sector benefited for nearly nine years from these measures, but now the available funds to subsidize interest rates on mortgages have been exhausted. This, in turn, has reduced local demand and negatively affected people’s decision to buy a house in the first three months of the year.
He added that the majority of Lebanese have found themselves priced out of the market without any subsidy support, which significantly impacted their decisions to buy or build a house.
“The suspension of the subsidy program will weigh on the willingness of prospective buyers to acquire a residential unit, given that 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,” he said.
According to the Byblos statement, the answers of respondents to the Index's survey questions in the first quarter reflected this trend, as only 3.8 percent of Lebanese residents had plans to either buy or build a residential property in the coming six months compared to 5.1 percent in the fourth quarter of 2017.
“The intentions of the Lebanese to buy or build a house need a conducive environment in order to translate into actual sales, which, in turn, requires immediate measures and incentives from the government.''
In this context, Ghobril reiterated the need for the government to revive demand through two immediate measures. First, the government should inject $500 million into the banking system in 2018 in order to revive the mortgage subsidies.
Second, the government should reduce from six percent to three percent the registration fee on all purchased residential units, not just on apartments whose price is $250,000 or less as stipulated in the government’s budget for 2018.
He noted that buyers of apartments that are priced at $250,000 or less were already exempt from registration fees if they qualified for loans through the Public Corporation for Housing, which was the case for the vast majority of mortgages that commercial banks approved in 2017.
Annahar asked a variety of young home shoppers about their plans given the current situation, with the common answer being that there was little question of trying to buy something in the near term, which meant waiting.
For some residential shoppers – such as one engaged young executive Annahar spoke with – instead of the unavailable lower rates of the subsidy program, he is finding himself paying a call on the commercial banking sector, where interest rates range on average between 7 to 8 percent.
“It remains the sole responsibility of the executive branch to develop a housing policy that would provide citizens access to affordable housing, with the banking sector standing ready to support a properly developed housing policy,” Ghobril said.
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