Demand for residential real estate in Lebanon stagnated in the fourth quarter of 2018, as reflected by the results of the Byblos Bank Real Estate Demand Index. The Index posted a monthly average of 51.2 points in the fourth quarter of 2018, nearly unchanged from 51.4 points in the third quarter of 2018 and increasing by 14% from 44.9 points in the fourth quarter of 2017. The fourth quarter results constitute the 20th lowest level in 46 quarters.

Real estate demand in the fourth quarter of 2018 was affected by the absence of concrete initiatives to stimulate housing demand, amid political uncertainties, stagnating consumer confidence and slow economic activity. As such, the Index’s average monthly score in the fourth quarter of 2018 came 61% lower than the peak of 131 points registered in the second quarter of 2010, and remained 53.4% below the annual peak of 109.8 points posted in 2010. Also, it was 14.1% lower than the Index's monthly trend average score of 59.6 points since the Index’s inception in July 2007.

In parallel, the Byblos Bank Real Estate demand Index posted a monthly average of 44.9 points in 2018, constituting a decline of 5.7% from a monthly average of 47.6 points in 2017. The limited decline of the Index reflects the continuous efforts by commercial banks to extend housing loans during the year, as banks met part of the demand by subsidizing mortgages from their own funds, as well as by offering regular housing loans. The other reason for the limited decline of the Index in 2018 is that stakeholders in the private sector have tried to fill part of the gap left by the suspension of subsidies, as some developers that are financially liquid have started to offer payment facilities to potential buyers that are similar to subsidized loans, until subsidies resume.

Figures issued by Banque du Liban about the distribution of bank deposits at commercial banks in Lebanon show that term deposits were the preferred type of account for resident and non-resident depositors in Lebanese pounds and in foreign currency at the end of 2018. Term deposits in all currencies reached $167.3bn at the end of 2018, constituting an increase of 3% from $162.5bn at end-2017. They accounted for 89.1% of total deposits in Lebanese pounds and in foreign currency at end-2018 relative to a share of 90% at end-2017.

Resident private-sector term deposits in foreign currency totaled $79.5bn and accounted for 42.4% of total deposits at the end of 2018. Resident private-sector term deposits in Lebanese pounds followed with $42.3bn (22.5%), then non-resident term deposits with $34.4bn (18.3%), term deposits of the non-resident financial sector with $7.1bn (3.8%), public-sector term deposits in Lebanese pounds with $3.7bn (2%), and public-sector term deposits in foreign currency with $158.6m (0.1%).

In parallel, resident private-sector demand deposits in foreign currency amounted to $10.1bn and represented 5.4% of total deposits at the end of 2018. Resident private-sector demand deposits in Lebanese pounds followed with $4.6bn (2.4%), then non-resident demand deposits with $3.3bn (1.8%), demand deposits of the non-resident financial sector with $2.1bn (1.1%), public-sector demand deposits in Lebanese pounds with $301.4m (0.2%), and public-sector demand deposits in foreign currency with $126.1m (0.1%).

Figures released by the Arab Federation of Exchanges show that market activity on the Beirut Stock Exchange (BSE) increased by 0.25% in the fourth quarter of 2018 from the previous quarter, constituting, along with the Casablanca Stock Exchange, the third highest performance among 16 Arab equity markets. In addition, the BSE underperformed the global equity markets (+6%), but it outperformed Arab equity markets that posted flat growth, as well as the stocks of emerging markets that declined by 7.84% quarter-on-quarter. In parallel, activity on the BSE dropped by 15% from the fourth quarter of 2017, constituting the third steepest decline in the region.

The BSE posted higher returns than the Palestine Exchange (+0.1%), the Bahrain Bourse (-0.1%), the Damascus Securities Exchange (-0.24%), the Abu Dhabi Securities Exchange (-0.41%), the Saudi Stock Exchange (-2.16%), the Boursa Kuwait (-2.83%), the Amman Stock Exchange (-3.38%), the Iraq Stock Exchange (-4.13%), the Muscat Securities Market (-4.84%), the Tunis Bourse (-6.8%), the Dubai Financial Market (-10.77%), and the Egyptian Exchange (-10.81%). In contrast, the BSE underperformed the Khartoum Stock Exchange (+7.83%), and the Qatar Stock Exchange (+4.95%).

In parallel, the market capitalization of the BSE reached $9.68bn at the end of 2018 and accounted for 0.8% of the aggregate market capitalization of Arab stock markets. It was higher than the market capitalization of the Iraq Stock Exchange ($9.46bn), the Tunis Bourse ($8.14bn), the Palestine Exchange ($3.73bn), the Damascus Securities Exchange ($1.52bn), and the Khartoum Stock Exchange ($1bn).