Egypt’s real estate market is expected to slow down in the first quarter of 2023 due to the introduction of high-interest certificates of deposit (CDs) and inflation.

There is a cautious sentiment in the sector, as developers withhold deliveries to capitalize on a potential depreciation of the EGP that would spike prices even further. The real estate sector is vital to the Egyptian economy, as it represents 20% of the country’s gross domestic product.

Despite the current limitations, properties are still considered safe long-term investments for many Egyptians. However, there are a lot of concerns in the sector, including the surge in prices and the instability of the pound. In this feature, Invest-Gate sheds the light on real estate experts’ expectations on the market performance during 2023.

Higher prices

Islam Al-Shahry, a member of the Real Estate Development Chamber at the Federation of Egyptian Industries, expects real estate prices to jump by over 30% in 2023 due to the imbalance in supply vs demand.

He notes that current prices of properties in the Egyptian real estate market are evaluated before their fair value.

What may push up prices and energize the sector this year, as per Al-Shahry, is the fact that many consider it a safe haven for their investment, which many are in dire need of to save the value of their money in the present skyrocketing inflation and volatility in the exchange rate of the pound.

By mid-January, building material continued its increasing trajectory, as steel prices jumped by EGP 2,500 per ton to reach between EGP 23,300 and EGP 27,360.

In addition, cement’s prices also increased to a range between EGP 1,600 and EGP 1750, while white cement’s prices rose up to EGP 2,800.

Egypt produces around 7.9 mn tons of steel and 4.5 mn tons of billet. The country imports 3.5 mn tons of billet annually, according to recent data from the Chamber of Metallurgical Industries.

CDs

On the other hand, the Egyptian real estate sector may slow down in the first quarter of 2023 due to the introduction of 25% certificates of deposits (CDs) by local banks, which urged many to prefer investing in CDs over properties, CEO of Tatwee Misr, Ahmad Shalaby, says.

This slowdown happened before with the advent of 18% CDs and will be limited in its impact, Shalaby adds.

For her part, Mariam Elsaadany, real estate analyst at HC Brokerage, states that the introduction of high-yielding certificates of deposit represents tough competition in the real estate sector.

That competition slowed down the growth of pre-sales to 8% in the first nine months of 2022, while volume slipped 5% YoY, compared to a 59% surge a year earlier, she adds.

Elsaadany notes that developers could not extend payment plans further, as previous years’ extended payment plans had already stretched their cash flows, raising concerns about affordability.

The analyst says that the apparent recovery in the Egyptian real estate sector, coupled with the devaluation of the pound, would boost the hospitality sector and rescue developers with high exposure to that sector.

She maintains that achieving economic recovery, adopting flexible exchange policies, and developing the medium-high mortgage finance market are considered important steps toward improving the performance of the Egyptian real estate sector.

Government support

The government has taken a variety of steps to support the real estate sector. At the end of January, the Egyptian government announced a group of measures aiming to support the vital sector, including extending the project delivery deadlines by 20% and reducing additional interest imposed by the Ministry of Finance to 1% from 2%.

The government also changed the accepted project completion percentage to 85% from 90%, which enables developers to complete the remaining 15% of construction at their own pace without delay penalty.

Earlier in February, the New Urban Communities Authority (NUCA) announced some facilities and amendments to land allocation mechanisms for service, investment, and urban projects in the new cities.

The approved facilities include increasing the implementation period for all service and investment projects by 20%.

The facilities also include a grace period in return for a fee and the possibility of scheduling all due installments of the value of the plots of land in 2023.

NUCA’s facilities allow the application of the volume rule in all urban projects based on population density, or the land exploitation coefficient, with a deduction of 50% of the value determined for granting this advantage, given that the project’s completion rate reaches 85%.