Property Futures

Real Estate News, Reviews and Investment

Egypt has potential for real-estate investment if the situation stabilizes

Article: Demand for real estate units in Egypt far outstrips supply.

Two years of unrest have had a devastating effect on the economy of Egypt and the currency has depreciated by about 15%.  Foreign reserves are at a critically low point effecting the ability of the government to import essential items such as wheat and fuel.  The weakness of the currency is however good news for the real-estate market and investors with large savings who are trying to preserve the value of that money by investing in property assets.In addition to locals, the currency makes it that much more attractive for other investments from Arab countries especially the more unstable ones such as Libya, Sudan and Syria.

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According to consultants Jones Lang LaSalle, prices for apartments in the upmarket suburb of New Cairo grew by 4% in the first quarter year on year.

  • Foreign developers are now eyeing the market and Al-Futtaim Group and Emaar Properties, based the United Arab Emirates, have planned  d partnership to build a retail, entertainment and residential complex outside Cairo.
  • However uncertainty over the outcome of feuding between President Mohammed Morsi and his secular opposition is still casting a shadow over real estate.

Some developers have suspended work on large housing developments after courts or the government canceled land sales because they are accused of having paid too little because of the connivance of officials in the Mubarak regime.

  • In one project, delivery of 200 villas has been delayed for this reason.
  • Another large developer is in court over its Madinaty real estate development project worth USD $3 billion.

Hard decisions need to be taken on reforming regulations but this is unlikely in the current scenario.  Developers say that more roads need to be built to make land accessible but this again is unlikely in the current state of the economy

Residential real estate

With more political stability, there could be a great deal of potential for real estate investment in Egypt.

  • Housing demand in some Gulf countries is dependent on expatriates looking for housing.
  • In Egypt, there are millions of middle-class people in Cairo who look forward to owning their own houses.  Life is difficult in Cairo because of the noise and traffic and many buildings dating to the British era are run down.
  • For a small minority who can afford to pay 1 million Egyptian pounds, developers are creating upmarket gated communities in the outer areas of the city for severe living conditions.  These are small cities with all the amenities such as shops, restaurants and swimming pools and, more important, excellent security in troubled times.

Experts believe that prices for residential property could rise as much as 20% this year partly because of increased construction costs.

  • Construction activity has grown by 60% at the end of 2012 in comparison to 2011, said Maged Omran of the Ministry of Housing.

The bottom line

Egypt has about 40 million real estate units (residential, commercial, tourist and industrial) registered with the authorities but the actual number is believed to be 30% in excess of this figure.

Egypt needs an estimated 800,000 new units a year but annual production is no more than 200,000 units. Real estate development therefore becomes a significant necessity.

In my opinion, the Egyptian real estate is a potentially lucrative investment if you have the appetite for the political and economic risk.


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