VZCZCXRO4175
OO RUEHAG RUEHBC RUEHDE RUEHKUK RUEHMOS
DE RUEHDM #2511/01 1520813
ZNY CCCCC ZZH
O 010813Z JUN 06
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9285
INFO RUEHEE/ARAB LEAGUE COLLECTIVE IMMEDIATE
RUCNMEM/EU MEMBER STATES COLLECTIVE IMMEDIATE
RUEHTV/AMEMBASSY TEL AVIV IMMEDIATE 1039
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RHMFISS/HQ USCENTCOM MACDILL AFB FL IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 002511 
 
SIPDIS 
 
SIPDIS 
 
NEA/ELA 
TREASURY FOR GLASER/SZUBIN/LOEFLER 
 
E.O. 12958: DECL: 05/25/2016 
TAGS: ABLD AMGT
SUBJECT: SYRIA'S RED HOT REAL ESTATE MARKET- A POTENTIAL 
VULNERABILITY 
 
REF: A. DMS 0005 
 
     ¶B. DMS 0290 
     ¶C. 05 DMS 4977 
 
Classified By: Charge d'Affaires Stephen Seche, reasons 1.4 b/d 
 
This is a retransmission of DAMASCUS 02439 to include 
additional TAGS. 
 
¶1. (C) Summary: Contacts suggest that Syria may be 
experiencing a real estate bubble, with property prices 
rising rapidly throughout the country, but especially in 
Damascus and the surrounding area.  Speculators increasingly 
are active in the market, with some Syrians trying to take 
advantage of an expected continuation of Gulf investment in 
real estate and the influx of Iraqis, which have increased 
pressure on an already tight supply of available property. 
While there is no indication that the bubble will burst any 
time soon, contacts say that a rapid devaluation in prices 
could have serious repercussions in some sectors of the 
economy that have speculated in the market, hitting industry 
and the nascent insurance companies particularly hard.  End 
summary. 
 
A Speculator's Market 
 
¶2. (C)  Property prices in Damascus and throughout Syria have 
been rising steadily over the past three years, with high 
demand for a limited supply of property escalating possibly 
into a real estate bubble.  The influx of hundreds of 
thousands of Iraqis since 2003 has been one of the primary 
sources of increased demand, with contacts reporting that 
property values in Damascus' poorer eastern suburbs have 
almost tripled.  Other contacts contend that members of the 
elite with close ties to the regime, as well as many other 
Syrians who historically have held their wealth in Lebanese 
and other foreign banks, are adding to the demand for 
property by repatriating their assets and feeding them into 
real estate to protect them from future financial sanctions. 
Demand has increased most recently, contacts say, primarily 
due to Gulf investors who are seeking to spend their excess 
liquidity from high oil prices in real estate markets 
throughout the region.  Syrians are buying real estate in 
anticipation of new project starts, due to the SARG's hyping 
of Gulf investment that began at the end of 2005 (ref A).  At 
the same time, strict government control of land, which 
limits the expansion of existing communities, and the high 
cost of building supplies like cement, is stifling new 
construction (ref B). 
 
¶3. (C) Contacts say that speculators are putting additional 
pressure on the market.  Buyers are turning over properties 
rapidly, with one contact stating that a new buyer realized a 
17% return in one month by reselling his new apartment with 
minimal upgrades.  Business contacts report that they face 
increasing difficulties finding new office space, because 
prices for commercial property can rise as much as 10% in a 
week during negotiations.  George Sayegh, General Manager of 
Bank of Syria and Overseas, stated that some industrialists 
have informed him they are choosing to invest their profits 
in real estate rather than reinvest them into their companies 
to take advantage of much higher expected returns.  As a 
result, prices for real estate in Damascus and surrounding 
areas have increased an average of 40% since January 2006, 
contacts report, with values increasing by as much as 200% in 
select areas during the same time period. 
 
High Prices Expected to Continue 
 
¶4. (C) Most contacts do not expect a market correction for 
the foreseeable future.  Contacts point out that prices in 
the rental market also are increasing at a rapid pace, which 
indicates that property is retaining its value.  Basil Hamwi, 
General Manager of Bank Audi Syria, stated his belief that 
petrodollars from the Gulf should keep Damascus property 
values high until the cost of living in the Gulf catches up 
with the high cost of oil.  Walid Abdel Nour, General Manager 
of Byblos Bank Syria, added that the market should continue 
to feed on the excess liquidity among domestic investors, who 
still have too few opportunities other than real estate in 
which to invest.  Demand for real estate will remain high, he 
stated, until a credible market for SARG treasury bills, a 
functional stock market, and a more competitive private 
 
DAMASCUS 00002511  002.2 OF 002 
 
 
banking sector are established.  Contacts state, however, 
that there are discrete events that could cause the bubble to 
burst.  Iraqis beginning to exit the market would decrease 
the demand pressure immediately, contacts say.  If Gulf 
investment dries up, Hamwi warned, the market may begin to 
unravel quickly, particularly if the hyped investment 
projects do not materialize. 
 
Economic Consequences 
 
¶5. (C)  Abdul Kader Housrieh, a manager at Ernst & Young 
Syria, downplayed the potential economic consequences of a 
market correction, due to the fact that most Syrians still 
buy property with cash instead of loans, insulating the 
financial sector from the negative effects of a rapid 
devaluation in real estate prices.  For his part, Hamwi 
commented that Bank Audi has only three real estate loans in 
its portfolio, and that the private banking sector as a whole 
has been very slow in extending credit to new projects. 
Other contacts, however, point out that a price crash could 
have severe repercussions in other, equally important sectors 
of the economy that are exposed to the market: industry and 
the nascent insurance sector.  Industrialists, who 
traditionally self-finance their business projects and 
increasingly have been speculating in the market, would see 
immediate erosion in their available capital.  The new 
private insurance companies, contacts report, are investing 
up to 25% of their liquidity in the real estate market 
because of the lack of other investment opportunities.  A 
market crash, therefore, could undermine the development of 
this new and promising sector (ref C).  In the meantime, the 
spike in real estate prices is deteriorating the standard of 
living for many Syrians, who no longer can afford housing in 
Damascus and other areas on incomes that have remained 
stagnant for the past several years.  Families reportedly are 
selling their homes in Damascus to buy multiple, larger units 
in the less affluent suburbs to support their children's 
needs for housing. 
 
¶7. (C) Comment: Contacts are uniform in admitting that the 
real estate market is a source of economic vulnerability for 
the country, but that it still is too early to tell when or 
how the market may correct itself.  It appears that prices 
are set to continue their rise for the time being, making 
some wealthy Syrians wealthier still, while limiting the 
economic opportunities for the vast majority. 
SECHE