Housing bubble in Lebanon

by

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 1: INTRODUCTION1

Introduction1

Research question2

Importance of the study3

CHAPTER 2: BACKGROUND AND LITERATURE REVIEW6

Housing Bubble theories6

Bubbles: three ideal types7

Ideal type 1. A pure speculative bubble7

Ideal type 2. An irrational expectations bubble8

Ideal type 3. The irrational institutions bubble8

View of housing bubble9

Summary of empirical studies10

Article 1 Factors leading to the U.S. housing bubble: a structural equation modeling approach10

Article 2: Price Bubbles on the housing market: concept, theory and indicators11

Article 3: The Economics of Housing Bubbles12

Article 4: Explaining the Housing Bubble12

Article 5: Low Interest Rates and Housing Bubbles: Still No Smoking Gun13

Article 6: Housing bubble and economic theory: is mainstream theory able to explain the crisis?14

Article 7: The Real Estate Bubble14

Aticle 8: Underpriced Default Spread Exacerbates Market Crashes15

Article 9: The UK housing market: bubbles and buyers16

Article 10: How High Gas Prices Triggered the Housing Crisis: Theory and Empirical Evidence16

Article 11: Housing bubbles, herds and frenzies: evidence from british housing markets17

Argicle 12: Housing Bubbles Assessment 2005-2010 : Experiences in Klang Valley, Malaysia18

Article 13: Price bubbles in housing markets: Concept, theory and indicators18

Article 14: Origins and Characteristics of Recent Residential Real Estate Bubbles19

Article 15: The Peculiar Economics of Housing Bubbles20

Housing buuble in Lebanon21

Affect of housing bubble in Lebanon24

Housing frenzies26

Owner-driven Reconstruction after Conflict28

Financial highlights30

Factors Influencing the Real Estate and Construction Sector In Lebanon31

Low interest rates:31

Excess Liquidity Levels:32

Prices of Raw Materials32

Impact of the Global Turmoil on Lebanon's Real Estate Sector33

Future prospects34

CHAPTER 3: DATA AND METHODOLOGY36

Availability of methodologies for the study36

Methodology used for the study36

Data used in the study37

Ethical Considerations38

CHAPTER 4: RESULTS AND DISCUSSION39

Sign of housing bubbles39

Arellano-Bond GMM42

ADF TEST43

Granger causality tests46

CHAPTER 5: CONCLUSION48

Recommendations50

REFEREENCES54



CHAPTER 1: INTRODUCTION

Introduction

Bubbles occur when there is excessive investment in financial assets, such as stocks, or in real assets, such as housing. The bubble bursts when the value of the investment plummets. The value of the investment may plummet for several reasons, including (1) investors realizing that they previously had overvalued the investment, resulting in a massive selling of the investment, and/or (2) the price of what the investment produces falls. One of the most famous speculative bubbles in history is Dutch Tulipmania (1634-1638), which involved people mortgaging their homes and industries to buy tulip bulbs, which they expected to resell at higher and higher prices. These expectations were based on past increases in prices. In early 1637 prices for some bulbs fell from a peak of several times a typical person's annual income to almost nothing (Dunn 2012, 341-366).

The Mississippi Bubble (1719-1720) and the South Sea Bubble (1720) involved the taking over of part of (respectively) France's and England's national debts by powerful trading ...