Why are rental prices increasing?

Source: Nida Al Watan

The surge in rental rates in Lebanon is no longer merely a reflection of increased demand for housing. It has become an economic indicator revealing deep imbalances in the real estate market, ranging from the absence of housing finance and declining purchasing power to limited supply and rising construction costs. As these factors persist, thousands of Lebanese citizens are facing increasingly expensive housing options, at a time when homeownership opportunities are declining and the gap between supply and demand continues to widen.

Perspectives differ regarding the underlying causes behind the surge in rental prices. While real estate experts attribute the crisis to the absence of housing loans and the stagnation of construction activity, the Owners’ Syndicate argues that the continuation of old rental contracts removes a significant portion of residential and commercial units from the market, worsening supply shortages and pushing prices upward. Between these two views, tenants remain the most affected party in a market that continues to lack balance and regulation.

The main reason

In an attempt to identify the factors behind this increase, stakeholders in the real estate sector offer different assessments, pointing to financial, structural, and market-related factors. The President of the Lebanese Syndicate of Real Estate Brokers and Consultants, Walid Moussa, told Nidaa Al Watan that “the main reason behind rising rents is the inability to purchase homes due to the absence of housing loans that would enable commercial banks and the Housing Institution to meet the needs of young Lebanese citizens across different regions, according to each individual’s financial capacity.”

He explains that “this reality is pushing a large segment of citizens toward renting,” adding: “Whenever demand increases compared with supply, prices rise, and this is the main reason behind higher rental costs.”

Moussa stresses that “higher real estate prices represent an additional factor contributing to increased rental rates,” attributing this to “global inflation and rising construction costs, which have led property owners to reassess the value of their assets at higher prices.”

He adds: “Since rent is calculated as a percentage of the property’s value, higher property sale prices are automatically reflected in rental rates.” He also notes that “Lebanon’s rental market has become fully dollarized, with rental rates now being set in US dollars.”

What the market needs

Moussa considers that “the real estate market is eager for the launch of new housing projects, linked to the revival of housing loans and the availability of borrowing opportunities,” stressing that “the real estate sector represents a key pillar of the Lebanese economy, as it drives around 72 professions, both directly and indirectly.”

He believes that “revitalizing this sector requires the implementation of reforms aimed at rebuilding the banking sector,” explaining that “the absence of a proper banking sector means the absence of a healthy real estate sector.”".

He adds that “despite the continued implementation of some urban development projects, the pace of construction remains limited, while the supply of residential units available for sale remains below the required level.” He stresses that “restoring access to housing loans would have a positive impact on real estate activity and contribute to stimulating the economic cycle.”

Moussa concludes by stressing that “the demand for establishing a Ministry of Housing is not new, as the syndicate has been raising this issue for years.” He considers that creating such a ministry “does not necessarily mean increasing the number of ministries, but rather represents a fundamental regulatory step, similar to practices adopted in developed countries, with the aim of organizing the real estate sector and encouraging the development of affordable housing projects that meet the needs of different segments of society.”

The owners’ syndicate’s approach

Regarding the Owners’ Syndicate’s approach to this issue, the syndicate’s legal advisor, lawyer Charbel Charfan, told Nidaa Al Watan that “the syndicate’s position on rising rents is based on a purely economic principle governed by the equation of supply and demand.” He considers that “the continued existence of old rental contracts has directly contributed to reducing the supply of apartments and commercial units available for lease.” He says: “When demand exceeds supply, prices increase, while they automatically decrease whenever supply grows compared with demand.”

Charfan points out that “the rental crisis will remain as long as the issue of old rental contracts and perpetual extensions has not been resolved. However, the matter has now reached its final stages due to the expiration of the nine-year extension periods.” He notes that “liberalizing these rental contracts would introduce a larger number of residential and commercial units into the market, restoring balance between supply and demand.” He explains: “If only two apartments are available for rent in a certain neighborhood, each owner may demand $1,000 per month, even though their actual value does not exceed $500. However, when around 20 apartments become available in the same area, landlords will no longer be able to impose excessive prices, and rental rates will instead be determined according to fair and prevailing market prices.”

Charfan underlines that “the Owners’ Syndicate rejects exploitative practices in the rental market,” affirming that “the syndicate continuously encourages landlords to adopt fair rental rates that align with prevailing market prices.”

He concludes: “At the end of the day, the landlord is also a human being, and every person acts according to their own convictions. But, we always advise landlords to charge fair rental rates, away from any form of exploitation.”

Ultimately, Lebanon’s rental crisis does not appear to be linked to a single factor, but rather to the accumulation of financial, economic, and legislative challenges that have developed over years. Between the absence of financing mechanisms, declining supply, and rising property costs, addressing the crisis remains dependent on reforms capable of restoring balance to the real estate market and establishing a more stable housing environment, one that reduces pressure on tenants while safeguarding landlords’ rights.