Egypt benefits from the fact that Egyptians like investing in fixed assets like property and as a result the industry doesn’t rely as heavily on foreign investment. This has sheltered the Egyptian property market over the past few years when its growth was only in its infancy. Now the Egyptian market stands in a strong position as it has weathered the storm far better than many other markets emerging at the time of the credit crunch.
Domestic Demand and the Financial Crisis
For young Egyptians couples, purchasing a house just before or at the time of marriage is expected. With over 500,000 marriages a year in Egypt there is a strong demand for housing for fist time buyers, a demand that supply struggles to meet. Furthermore, due to an increasingly large middle class and young population, demand for affordable quality homes is set to increase exponentially.
Ahmad Ghozzi, Chairman and CEO of ACG-ITF which specialises in international real estate trade fairs said “Egypt’s real estate sector continues to perform well in contrast to those of other regional players which are struggling to cope with current market and economic conditions. Internally, residents believe in the stability of property investments and have a good grasp of changing business cycles. There is still a large gap between supply and demand which developers can capitalize on, especially in family-centered projects as there are about 500,000 marriages annually. In addition, the general view towards the crisis is not as gloomy in this part of the world. Property owners and developers thus have a positive outlook on the industry’s performance for this year.”
“The extent of the crisis abroad is very different in Egypt. Overseas, it’s a full blown crisis where the real estate industry faces heavy debt, and financing and loan problems rooted in unbalanced business, where financing was provided at values far exceeding the value of the property itself and without adequate guarantees. In Egypt, financing is not debt-based since property buyers often purchase from their surplus liquid money. The portion of payment that is financed is up to 3 per cent only, and there is great demand for housing units in Egypt, where around 500,000 to 600,000 marriages occur annually. Total annual supply of housing units is 150,000 only, which represents a deficit of up to 350,000 units per year,” he added.
This view is summed up by Iman Ismail, the Managing Director of EMRC. “Conservative lending was the main reason that Egypt did not experience the kind of catastrophic collapse seen in the US real estate market. Egypt’s small mortgage market only started to develop over the past six years so we have been shielded from the global real estate crisis,”
There is also a strong foreign demand for Egyptian property. FDI is flowing into the country due to property’s excellent value for money, flexibility in currency meaning investors often buy property using UK pounds, US Dollars or Euros. In addition, foreign money goes quite far as the exchange rate is favourable. Calculating which currencies have moved most in favour against sterling over the last year, Egypt was placed in the top 3 with the Pound strengthening against the Egyptian pound by 14%.
The cost of living in Egypt is also very low. According to the Property Guideline Report, Egypt is one of the 10 most affordable property markets in the world. The value for money in Egypt is often highlighted by investors as luxury properties which are popular for holiday lets, can be bought at very competitive prices. The massive tourism growth, coupled with the low prices of Egyptian property, allow for potential rental yields of over 20%.
Experienced Egypt property lawyer Khalid El Nouby “In recent years the Egyptian government has shown a determined commitment to attracting overseas investment into the property sector and therefore the process of buying property and property ownership for foreign nationals as investors is improving all the time and new registration rules have been drawn up.”
The growing foreign demand has been noted by Shaz Yaqoob, Egypt Property Investment Consultant for Experience international. “We tend to agree as our statistics during the latter half of 2009 showed a growing number of people enquiring about property investment opportunities in Egypt, property sales are increasing, and the number of quality and secure developments being released to foreign and domestic investors is also on the increase”