Despite the floatation of the Egyptian pound back in November 2016 and its consequences such as significant price hikes across the real estate market, 2017 saw an increased demand. Measuring market demand through studies, Aqarmap concludes that the demand rose to 3,231 points in October from 2,678 points in January; and here is why.
Population Growth Fuels Demand
Higher demand in the real estate market continues to be spurred by population growth, especially that the age group looking for housing represents a large segment of the society, according to Aqarmap Business Development Manager Ahmed Abdel-Fattah.
Egypt’s population rose to 94.8 million in April 2017 from 72.8 million back in 2006, growing by approximately two million per annum, according to released figures by the Central Agency for Public Mobilization and Statistics (CAPMAS).
Egypt needs 600,000 residential units per annum, “with expectations for this figure to rise to one million in the future,” Minister of Housing, Utilities and Urban Communities Mostafa Madbouly has announced last month.
An Investment “Safe Haven”
Property maintains its attractiveness as “the primary repository of value for being profitable, easy, and one of the few remaining stable investments,” Abdel-Fattah adds.
“Egypt’s real estate sector continues to be a safe haven against continuous inflationary pressures,” Senior Equity Analyst at Mubasher International Yasmine Radwan reiterates.
Expats’ Investment in Property Market
With the decreased EGP value, the real estate market has become very attractive to Egyptians abroad due to the affordability of unit prices. The real estate market saw a high demand from the GCC region in 2017, representing an average of 30% of the total demand, of which 15% comes from the KSA, Abdel-Fattah notes.
In reality, the price of a housing unit has decreased after the devaluation of the pound to Egyptian expats with their income, being paid in the hard currency. “Although the USD to EGP exchange rate doubled, the price per square meter increased but did not double,” Basheer Mostafa, CEO of First Group, tells Invest-Gate.
As a result, the appetite of expats for buying property in Egypt has increased “but the increase is neither significant nor clearly reflected in the market due to the surplus in supply of properties, as well as, the clients’ distrust of developers, fearing that they will not deliver on time,” Mostafa adds.
Meanwhile, Sales Director of Oriental Urban Development (OUD) Ahmed Zaalouk sees foreign clients increased their purchases as the housing units have become “cheaper” to them. However, the local purchase power showed some decline, which led most if not all developers seeking attractive marketing tools.
Flexible Payment Plans Seen Encouraging
“The devaluation of the currency and increased inflation reduced the purchasing power of consumers, yet the overall demand remains strong, thanks to developers’ flexible payment plans.” JLL Country Head of Egypt Ayman Sami tells Invest-Gate.
Explaining further, Abdel-Fattah says that the EGP floatation and the rise of interest rates on Egyptian-pound-denominated- long-term deposits did not weigh down demand as developers started to offer attractive extended payment plans over eight to ten years against two to five years in the past. “The real estate market is active, smart, and able to adjust itself according to the surrounding variables,” Sami adds.
“Flexible payment terms led to high demand in the upper-middle income class evidenced by growth in pre-sales of top developers,” Radwan states.
New Cities Come in Play
The residential market is spurred by further expansion plans of the satellite cities as they continue to absorb population growth and reduce densities in central Cairo, according to JLL’s Real Estate Market Overview for Q3-17.
The top sought-after area to home buyers, according to Property Finder’s 2017 Insights, was New Cairo, followed by Sheikh Zayed, 6th of October City, Nasr City, Ain Sokhna, North Coast, and Maadi.
And generally, “people are also purchasing units in new cities currently under construction such as the New El-Alamein City, El-Dabaa, Al-Mostaqbal City, and the New Administrative Capital,” Zaalouk notes.
These trends will last for at least five to ten years as more developments are being built in these “new markets,” which Zaalouk concludes are good investment opportunities for buyers.