The ongoing war between Israel and the Lebanese militant group Hezbollah has inflicted devastating damage on Lebanon, compounding the strain on a country already grappling with financial collapse. With civilian lives, infrastructure and the economy all caught in the conflict’s crossfire, Lebanon faces an unprecedented crisis.

A World Bank report released last week highlights the severe toll: the conflict has already caused $8.5 billion in combined damage and losses, a figure expected to rise as the hostilities continue.

Economic losses are at $5.1 billion, primarily driven by setbacks in commerce, tourism and agriculture.

Direct physical damage has so far amounted to $3.4 billion, and the country’s real GDP is anticipated to contract by 5.7 percent in 2024 – a stark contrast to the modest growth of 0.9 percent predicted in a conflict-free scenario.

The housing sector has borne the brunt of the destruction, with losses estimated at $2.8 billion. Over 99,000 housing units have been partially or fully destroyed, according the World Bank.

“The real estate sector is going through the worst phase in Lebanon’s modern history,” Walid Moussa, president of the Real Estate Syndicate of Lebanon, told Al Arabiya English.

The conflict began when Hezbollah opened fire on Israel in support of Hamas following the outbreak of the Gaza war in October last year. Israel says its goal is to secure the return home tens of thousands of people evacuated from its north.

Despite losing its leader, Hassan Nasrallah, and other senior commanders, Hezbollah has maintained its rocket fire, extending its reach to Tel Aviv. Its fighters are also battling Israeli troops on the ground in the south of Lebanon.

The casualty toll since October 2023 stands at 3,558 people killed in Lebanon, the Lebanese health ministry says, most of them killed since Israel’s intensified offensive in September.

On the Israeli side, Hezbollah strikes have killed 43 civilians in northern Israel and the Israeli-occupied Golan Heights, alongside 73 soldiers in combat and attacks, according to Israel.

At least 1.2 million Lebanese have fled southern Lebanon, Beirut’s southern suburbs and the Bekaa Valley, per Lebanese authorities. Many have sought refuge in public schools, while others endure the streets with no shelter.

Israel continues its strikes on these areas, claiming to target Hezbollah strongholds, but thousands of residential buildings have been reduced to rubble, leaving widespread devastation.

Amid this loss of life and displacement, the housing market has experienced a seismic shift.

Real Estate Freeze

Lebanon’s housing and real estate sectors, once considered stable despite economic challenges, are now at a breaking point.

“Investment has come to a standstill, with prospective buyers unwilling to commit unless prices drop to unprecedented levels,” Moussa said.

Unlike during the 2006 all-out war between Israel and Hezbollah, real estate prices have not declined significantly this time. There are two key reasons for this trend. First, prices had already plummeted following Lebanon’s 2019 economic crisis, leaving little room for further depreciation. Second, sellers are clinging to hopes of a brighter future, banking on potential post-war prosperity, according to Moussa.

“People believe that after the war, there will be better days ahead. Unless they urgently need cash, they’re not selling,” he added.

Rising Rents Amid Mass Displacement

While the property sales market stagnates, the rental market tells a different story. Rental demand surged – particularly in areas deemed safe – as cross-border attacks between Israel and Hezbollah escalated into full-blown warfare in mid-September.

“Landlords have responded in two ways: some are refusing to rent their properties out of fear of Israeli airstrikes targeting areas with displaced residents, while others have capitalized on the crisis, demanding exorbitant rents,” noted Moussa. “There’s complete chaos and opportunism here, however, there’s no regulation on how much landlords can charge.”

Israel’s airstrikes appear to track the movement of the displaced, spreading a pervasive fear that wherever people sought refuge, Israeli bombs might follow.

In mid-October, an Israeli airstrike hit an apartment building in the Christian-majority town of Aitou in northern Lebanon, where a displaced family had taken shelter with relatives. It was the first time the area had been attacked in a year of hostilities between Israel and the Shia group.

Israel claimed that the strike targeted a Hezbollah figure following the visit of a man believed to be distributing aid money for the group to the house where the family was staying.

Yet, this is far from the only dilemma. Some are forced to suffer the daily threat of bombardment simply because they have no other choice.

“Where can we go? With an 8-year-old and a 10-year-old, we can’t afford to leave our home. We can’t afford to rent elsewhere. The situation is very tough,” said Marian, 42, who asked to be identified by her first name only. Marian lives in the southern village of Kawkaba, which was hit several times by Israeli warplanes.

Lebanon’s real estate market, particularly in major urban hubs like Beirut and Jounieh, has long been characterized by concentrated ownership, said Sami Zoughaib, an economist at the Policy Initiative, a local thinktank.

“A handful of families and companies dominate the sector, enabling them to set prices independently of market conditions,” he told Al Arabiya English. “Even before the current conflict, the market exhibited anomalies, such as persistently high rents despite substantial vacancy rates – around 40 percent of apartments in Beirut remained empty, yet prices failed to adjust to low demand.”

The Day After

With the destruction of longstanding family homes, residents find themselves with no viable alternatives. Entire communities will need to be rebuilt from the ground up, and many displaced families face the grim reality that returning home will not be feasible in the foreseeable future.

Aya Abi Haidar, a Lebanese content creator, recounted in a reel shared on Instagram how her mother’s home in Beirut’s southern suburb was flattened in seconds, erasing 21 years of life and memories.

“We saw the building marked in red on the map before it collapsed,” she said in the video, referencing evacuation warnings issued by the Israeli army’s Arabic-language spokesperson on X to warn of imminent airstrikes.

Abi Haidar noted that the home originally belonged to her grandmother, who passed it down to her daughter, with the intention that it would eventually belong to Abi Haidar and her sister.

For countless families whose homes have been destroyed, the path to recovery is uncertain.

“Without a functioning banking sector, obtaining loans for reconstruction is virtually impossible,” said Zoughaib. “While a minority of families may have the resources to rebuild, the majority will rely heavily on external assistance. Still, clarity is lacking on who will finance private residential reconstruction.”

Moussa envisions a two-phase solution. “The first phase would involve setting up prefabricated houses near the affected regions to provide immediate shelter.”

These are homes manufactured off-site in standardized sections or modules and then transported to the desired location for assembly.

“The second phase would focus on rebuilding homes and residential buildings,” he added.

But this hinges on an influx of international aid and donor contributions. “Without sufficient funding, even interim solutions may not materialize,” Moussa added. “The Lebanese state lacks the capacity to address these challenges on its own, and failure to act will exacerbate the humanitarian crisis.”

Historically, Lebanon’s political system has struggled to deliver effective solutions, often leaving vulnerable populations in prolonged uncertainty.

“The longer this displacement persists, the more strain it will place on host and displaced communities alike,” noted Zoughaib. “As frustrations mount, there is a risk of heightened social tensions. In Lebanon’s volatile environment, such frustrations are often redirected by political elites, fostering divisions rather than addressing systemic failures.”