Develop first, then patch up later in Lebanon's boom

The January blues have been cruelly compounded by the daily wailing of a pneumatic drill. It is part of renovation work in an apartment two floors below mine, but the noise is so loud it sounds like it could be in the corridor. The owners are apparently "investors", hoping to cash in on Lebanon's latest property boom. My building is 40 years old; the real appetite is for modern developments. On every street in my neighbourhood is a vast hole into which will be poured the concrete to throw up yet another gleaming, glass tower with a seductively Elysian name, selling for between US$3,000 (Dh11,020) and $6,000 a square metre.

I am already being subjected to the fallout from another project. The 50-storey development at the top of my street has created a day-long vibration interspersed with tremulous thuds that feel as if Godzilla is stomping up the street. At night, a retina-burning halogen light on one of the derricks shines permanently into the sitting room, necessitating a tiresome rearrangement of furniture. While the Dubai property market appears to have taken a bath, Beirut's is riding high. Banque Audi, one of Lebanon's blue-chip banks, has predicted that the sector will see growth of between 10 and 13 per cent over the next three years.

The development frenzy started about five years ago, when Gulf investors who had made a packet on the capital markets, and expatriate Lebanese making hay in the sunny GCC, started buying. Panic set in among the locals, who, not wanting to be left behind, scrambled to get on the ladder. Always the last to catch on - I have been renting the same apartment for the past nine years - I am also toying with the idea of buying.

The nice man at the generally conservative HSBC had no hesitation in saying he'd lend me 80 per cent on the spot when he heard I wanted to buy in the recherche suburb of Ashrafieh. But local developers are muddying the market water by offering buyers an "in" on apartments that are still on the drawing board for a mere 10 per cent ante with attractive "interim" payments until the property is built - any time between two and three years.

No wonder investors are stuffing any spare cash into property they will never live in. It beats private equity. Government controls on speculating would be very un-Lebanese, but the central bank is at least making a token gesture by offering attractive loans to buyers who plan to live in their newly built apartments. Elsewhere, the Lebanese have been readjusting to a new regional order. After a five-year hiatus, the Syrians have returned wielding renewed influence, courtesy of a rapprochement between Riyadh and Damascus.

The House of Saud may have been very fond of Rafik Hariri, the assassinated former prime minister, but regionally it needs Syria in its continuing stand-off with Tehran, hence the new Lebanese cabinet is stuffed with just enough pro-Syrian ministers to make sure Damascus has a say in what goes on next door. Proof of this came at the end of the year, when Saad Hariri, the prime minister and son of the slain premier, visited the Syrian capital and shook the hand of president Bashar al Assad, the man many believe had a hand in the killing of his father.

All this week, Walid Jumblatt, the enigmatic Druze chieftain and key figure in the 2005 Cedar Revolution, has been doing the rounds, hugging and kissing all his sworn political enemies. But while Lebanon's democratic and sovereign aspirations may have taken a hit, most observers agree that new stability should be good for business. At the end of the year came the announcement from Standard & Poor's (S&P) that their Lebanon ratings had improved to "B" from "B minus" and "C".

"Let's face it, in the past five years we have been living on our nerves not knowing when the next bomb will come from," said one very senior banker not known for his Baathist sympathies. "But enough is enough. This is reality." The word on the street is that Saudi investors are looking to Lebanon with a renewed appetite, and it's not just for the gazillion sq metre apartments that dot the seafront.

They are apparently looking at Lebanese pharmaceutical and insurance companies, and even some banks, which are profitable and relatively cheap - as little as $50 million will buy you a going concern and a bit of kudos thrown in for good measure. Sure, the top ones such as Audi and BLOM will set you back a few billion, but there are nearly 50 others to choose from. It's a cliche, but Lebanon really is a remarkable country. Depending on who you talk to, GDP stands at $40 billion, or roughly $10,000 per capita; not bad for a nation with an effective workforce of less than 10 per cent of the population and a government that does little to stimulate business or encourage genuine foreign investment.

Uncertain security, shocking infrastructure, snail-like internet speeds and expensive phone tariffs have seen to that. But the Lebanese are by and large cheerfully indifferent to their shortcomings. Certainly, a poor infrastructure has not appeared to deter those loveable property developers. "Take that huge project at the top of your street," said my banker friend. "It looks great, but Beirut's sewerage system is Ottoman and was built for a much smaller city. I wonder what would happen if everyone in the building flushed the toilet at the same time."

The Lebanese, as they do with most things, will cross that particular bridge when they come to it. In the meantime, we muddle through gloriously. Michael Karam is a freelance public relations and media consultant