Publications

Lebanon’s house prices witnessed double digit annual growth in 2004-2010, with major increases taking place after 2006. This paper assesses the case of housing affordability in a country that is a large receiver of remittances. The case of Lebanon shows that a stringent regulatory framework, based on public private cooperation, can contribute to more loans by making use of the large deposits held by commercial banks through exemptions from reserve requirements. However, when it comes to housing affordability, this regulatory framework could hardly compensate for the sharp rise in house prices during the period 2004 - 2010. The results reveal that purchase affordability has sharply deteriorated from 2004 to 2010 according to the GNI data, which make each of the three mortgage schemes almost unaffordable. Although to a lesser extent, the purchase affordability for the GNDI has also deteriorated it has shown itself to be more immune to the increase in house prices. Moreover, the results suggest that the lower middle-income category of households earn less than half of the qualifying income. This paper can finally reveal an interesting paradox: In countries of large remittances, the best way the lower middleincome residents can afford a mortgage and live in the country is to leave and work abroad.