A strong demand for smaller apartments has enabled Lebanon’s real estate market to survive the current financial downturn.

Unlike Dubai, the Lebanese government has adopted a more measured approach to developing its real estate market, targeting the low-to-middle income segment where demand is high and, most importantly, sustainable.

The road network from downtown Beirut to the outskirts of the capital has opened up a raft of opportunities to buyers seeking small and convenient living spaces.

Real estate sales grew by an annual 19.6 per cent average between 2004 and 2009 and have more than doubled in the first five months of 2010. Prices remain high, but the success of the market is driven by the demand for affordable housing, coupled with monetary regulations that insulate the sector from the affects of the financial crisis.

Robust demand is reflected in the country’s construction activity. Construction permits increased by 9.4 per cent a year over the past five years. During the first half of 2010, permits rose more than 53 per cent.

Economists predict the Lebanese real estate market is unlikely to witness similar growth rates over the longer term, but due to undervaluation of properties some three years ago, the sector is well-placed to continue weathering the global downturn.

Stability is crucial to the market’s growth. A large amount of real estate stock is coming on to the market in 2011 and this could depress prices. The provision of low-income housing for locals will remain of the utmost importance to drive the market forward.

High-end real estate sales will always have a place, but as a shift to the lower-end sector is likely to creep across the Middle East, smaller units will offer more secure business opportunities to investors.