BEIRUT: Byblos Bank Real Estate Demand Index, a survey of consumer sentiment for property shopping, showed a marked increase from the anemic first quarter of 2018, but the ongoing reality is a mixed one.
The results released Thursday show that the Index posted a monthly average of 43.7 points in the second quarter of 2018, constituting an increase of 31.8 percent from 33.2 points in the first quarter of 2018 and a decrease of 16.3 percent from 52.3 points in the second quarter of 2017. The second-quarter results constitute their 14th lowest level in 44 quarterly readings. Thus making the demand-index jump look deceptively high.
The Demand Index reported by Byblos in early April, representing the first quarter of 2018, posted a monthly decline of 26.1 percent from the final quarter of last year.
Commenting on the results, Nassib Ghobril, Byblos Chief Economist, said: “the increase of the Index in the second quarter of the year was mainly due to the announcement in April by the ministries of Finance and Social Affairs that the government intends to allocate LBP 1,000 billion to subsidize interest rates on housing loans, which raised expectations that affordable mortgages for limited-income citizens will resume after their suspension at the beginning of the year.'' The announcement is only a proposal at this time.
He added “another important, but understated, factor that contributed to the improvement of the Index is the fact that Banque du Liban and commercial banks processed pre-approved applications for subsidized housing loans that were pending during the first quarter of the year, which allayed the concerns of applicants at the time.”
However, Ghobril cautioned that the increase of the Index in the second quarter should not be viewed as a change in the dynamics of the housing market, as the improvement comes from a very low base following the first-quarter results that constituted the Index’s third lowest level in 44 quarterly readings.
Further, the Index’s average monthly score in the second quarter of 2018 came 67 percent lower from the peak of 131 points registered in the second quarter of 2010, and remained 60 percent below the annual peak of 109.8 points posted in 2010. Also, it was 27 percent lower than the Index's monthly trend average score of 60 points since the Index’s inception in July 2007.
For a large percentage of Lebanese home shoppers, the beginning of the year held something of a surprise; the country’s subsidized housing program had effectively run out of money.
For very compelling economic reasons, an estimated 90-plus percent of residential shoppers favor two main options for obtaining financing. Either the Banque d'Habitat (the Housing Bank) for those with greater means; or the PCH (Public Corporation for Housing), for those shoppers with lower incomes.
The program is expected for official revival early in 2019, according to various reports, but meanwhile a government must form, the cabinet and parliament vote on parts of any restart of the housing loan subsidy program, and an official budget must be voted. Some suggest 2020 might be a more realistic expectation.
The answers of respondents to the Index's survey questions in the second quarter of 2018 show that 4.9 percent of Lebanese residents had plans to either buy or build a residential property in the coming six months compared to 3.8 percent in the first quarter of the year and to 5.9 percent in the second quarter of 2017.
In comparison, 6.8 percent of residents in Lebanon, on average, had plans to buy or build a residential unit in the country between July 2007 and June 2018, with this share peaking at nearly 15 percent in the second quarter of 2010.
Ghobril considered that ”Lebanese citizens need to see the authorities’ intentions to restore subsidies on mortgages translated into concrete measures, as any delay or uncertainty about this issue may dent the expectations of households and, in turn, further reduce demand for housing.''
He pointed out that the ongoing suspension of the subsidy program will continue to weigh on the willingness of prospective buyers to acquire a residential unit, given that buying a house constitutes one of the most important lifetime investment decisions for the Lebanese.
Ghobril added that ''it remains the responsibility of the executive branch to not only cover interest subsidies on housing loans for limited-income citizens but also to take the lead in developing a comprehensive housing policy that stimulates demand for all segments of the residential housing market in Lebanon.''
The Byblos Bank Real Estate Demand Index is a measure of local demand for residential units and houses in Lebanon. The Index is based on a face-to-face monthly survey of a nationally representative sample of 1,200 males and females living throughout Lebanon, who reflect the demographic, regional, religious, professional and income distribution of Lebanon.
The surveyed persons are asked about their plans to buy or build a house in the coming six months.
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