Despite headwinds and economic turmoil associated with the currency devaluation in Egypt, the value of projects awarded in 2022 represented approximately 21% of the total value recorded in the MENA region, indicating a year-on-year spike since 2020, Invest-Gate reports, citing JLL recent report.
JLL attributes this to a record inflow of foreign direct investments (FDIs), which increased by 71% for FY 2021/2022, and regional developers investing in critical infrastructure projects, highlighting a resilient real estate sector.
Although the International Monetary Fund (IMF) lowered its prediction for Egypt’s real GDP for FY 2022/2023 to 4%, Trading Economics recorded that FDI in the capital had reached an all-time high of $7.7 bn in Q1 2022 after merely averaging $2.8 bn since 2002.
The pace of investment is driving the development of the real estate sector, as Egypt is commencing the development of 20 new cities, while also redeveloping some of its existing stock.
Laura Morgan, Market Intelligence Lead for the Middle East & Africa at JLL, states: “The record inflow of foreign direct investments coupled with regional developers investing in critical infrastructure projects has helped Egypt’s real estate market remain resilient in 2022, despite headwinds and economic turmoil associated with the country’s currency devaluation. Egypt is commencing the development of 20 new cities while redeveloping some of its existing stock, which demonstrates the strength of the country’s construction sector.”
Morgan adds: “Egypt recently hosted the COP27 climate talks, and data suggests that the region has improvement opportunities associate with decarbonising the construction sector and implementing real estate sustainability assessment. Whilst countries in the region are currently focusing on their paths to Net Zero targets, Egypt has pledged to update its climate plan by June 2023, including a long-term strategy that explores a net zero target.”
According to Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS), Egypt welcomed approximately 5 mn visitors in the first half of 2022, up from 2.5 mn during the same period in the previous year.
Looking ahead, Trading Economics forecasts that travel and tourism will account for 12% of Egypt’s total GDP by 2024, equating to up to 40 million tourists. Within Cairo’s residential sector, approximately 18,000 units were delivered in 2022, and 2023 is expected to see the delivery of approximately 35,000 units, indicating a strong residential sector in terms of construction development.
Furthermore, construction materials linked to aluminum, such as façade systems, Rebar, and MEP elements like generators and semi-conductors, saw the greatest impact in connection with delivery shipping time, leading to financial bearing and contractors citing the need to micromanage the supply chain to mitigate risks and safeguard project programs, budgets, as well as cash flow.
Nevertheless, JLL witnessed improvements within the supply chain in the second half of 2022, however, price increases remained a significant risk in Egypt due to the currency devaluation and rising inflation, with contractors and developers proceeding with caution. JLL expects that the construction material prices are likely to continue to increase throughout 2023 on the back of further floatation of the Egyptian currency.
In addition, construction costs will be balanced against the local market and global economic factors, although commodity and other material prices are softening, or have already flatlined.