The two most popular options for home shoppers in Lebanon in order to finance their purchases is to either get a loan from the General Organization for Housing in case the apartment price is relatively low, or from the Housing Bank if the price is on the higher end.
However, earlier this month the Central Bank of Lebanon issued a new circular with amendments on subsidized loans, and as a result the Housing Bank increased its the interest rate from 3% to 3.75% while lowering the payment period from 30 to 20 years and toughening the lending terms in general.
To give you an idea of how these amendments impacted the monthly payments, a loan of $250,000 used to cost ~$1,050 on the previous conditions, but currently cost ~$1,500 based on the new terms and rate (refer to their loan calculator). Needless to say, this 50% increase means that a lot of home shoppers now can no longer afford the apartments they were previously aiming for!
I, for example, have been searching for an apartment in Beirut for a while now and the new terms mean that I have two options, to either settle for a significantly smaller one in space, or simply look for one of the same size outside the city. The latter is unfortunately a deal breaker for me so I just decided to halt everything now in hope for the prices to go down maybe… I guess it is only logical for this to happen now that the demand is expected to take a hit.
Things are by the way also quite ugly now for people who are already engaged by contracts with real estate developers. Those usually pay monthly installments directly to the developers until the project is fully complete, and then apply for a loan to finance the remaining amount, but they definitely didn’t see a 50% increase on their future payments coming! And while people like me can simply stop searching, others who are bound with contracts can do nothing but go for the loan anyway or pull out of the whole thing and pay a certain penalty to the developer for doing so.
I’m not an expert in economics but things seriously don’t seem right with the new Housing Bank decision, I mean you can’t simply cut down the people’s purchasing power just like that. I just hope this isn’t an indication of the Lebanese Lira being in a bad situation now and I also hope these amendments are only a temporary measure. Otherwise, I guess the real estate market is expected to go into stagnation no matter how developers try to convince the public that it is a resilient sector!