BEIRUT, Oct. 11 (Xinhua) -- Prices of Lebanon's residential apartments have seen a remarkable drop in the past year due to the decrease in demand by Lebanese expatriates and residents, real estate developers told Xinhua on Thursday.
"Prices of big apartments dropped by around 25 percent while prices of small and medium flats went down by around 10 to 15 percent," said Atef Dagher, owner of Dagher Group, real estate developer.
"People do not have money to spend on real estate," Dagher added.
He noted that demand stood at three to five percent last year but this year it is nonexistent.
Likewise, Raja Makarem, owner of RAMCO real estate developer, told Xinhua that prices of big apartments have dropped by up to 40 percent while prices of small and medium flats have seen a drop as well.
"We have been marketing a project comprised of big apartments and we sold around 10 flats in the last five months of the past year at a discount of 40 percent but this year we were incapable of selling any units," he said.
There are big discounts on real estate in the country but people are not encouraged to spend their money in the current circumstances, said Makarem.
According to the latest real estate demand index released by Byblos Bank, the second quarter of 2018 shows that 4.9 percent of Lebanese residents had plans to either buy or build a residential property in the coming six months compared to 5.9 percent in the same period of 2017 and a peak of 15 percent in the second quarter of 2010.
Makarem believes that this drop in demand is due to the lack of confidence in the country.
"Also the civil war in neighboring Syria is a heavy burden and it weighs heavily on clients' appetite to spend money on real estate," he said.
Dagher said that demand is not existent nowadays except people who are willing to buy apartments through the Public Corporation for Housing (PCH).
"Thousands of people are waiting for the activation of housing loans through PCH," he said.
PCH announced earlier this year that no applications for housing loans will be accepted from July 9.
The Central Bank of Lebanon usually funds the housing loans through PCH and the Housing Bank.
The central bank provided commercial banks with a fund worth of 500 million U.S. dollars in February, allocated for subsidized housing loans that would be used by Lebanese citizens to buy apartments.
The fund, however, was drained within a month due to the very high demand.
This has created serious problems for both citizens and developers.
Some people have complained that they have already made a down payment to buy apartments while counting on the housing bank to finance the rest of the purchases with subsidized loans.
On the other hand, some people have made down payments for unfinished apartments. Real estate developers are unable to complete their projects and deliver the apartments to buyers due to shortage in cash.
This prompted Lebanon's parliament last month to allocate 100 billion Lebanese pounds (66 U.S. million dollars) to subsidize part of the interest rate on housing loans valued at 1,500 billion pounds for 5,000 housing units offered by PCH.
The parliament stressed that this allocation was a temporary measure until the next government hammers out a long term policy for activating the real estate sector.
Moreover, Central Bank Governor Riad Salameh said last month that Banque Du Liban, or the Bank of Lebanon, will reactivate the housing loan program in 2019.
For Makarem, subsidies will only activate part of the sector by solving the problem of some people who want to buy small apartments at a minimum price of 200,000 U.S. dollars.
"This is not a full solution. What we really need for this sector is a real solution that would restore confidence in the country and bring back demand in the sector," he said.
Independent economist Jassem Ajjaka said that the problem is much more serious.
"These subsidies are nothing but a short term solution to avoid a strong reaction by Lebanese citizens who were impacted by the end of the subsidies program in the first place," he said.
Ajjaka explained that lawmaker Ibrahim Kenaan made it clear that the 100 billion Lebanese pounds allocated by the Finance Ministry for this sector are only aimed at subsidizing part of the interest rate on loans but not the actual amount of loans.
He explained that commercial banks did not accept to finance these loans from their money especially the central bank.
The economist believes that the only solution is that the central bank finances loans and subsidizes the interest rates as it used to be the case in the past.