Real Estate Industry
- Increased costs and uncertainties resulting from the devaluation of the EGP have negatively affected most sectors of the Cairo real estate market during 2016.
- The Central Bank of Egypt (CBE) floated the Egyptian Pound (EGP) on third of November to allow its value to be determined by supply and demand factors.
- This significant drop in the value of the local currency resulted in a lot of confusion and uncertainty, which has negatively influenced most sectors of the real estate market in the short term.
- In the residential market, developers have faced higher construction prices as nearly all imported materials have increased in cost significantly
- Developers have chosen to pass on these increases to homebuyers through higher EGP prices in November, with further price hikes of 25-30% in early 2017. To help offset the full impact of these increases, some developers have introduced more flexible payment plans to improve affordability, and others are looking at more efficient unit designs and higher density land usage.
Cairo Market Summary:
- Most office rentals are quoted in USD and following the currency, flotation has therefore resulted in an effective doubling of occupancy costs in EGP terms.
- Some landlords have subsequently agreed to exchange rate caps lower than the prevailing market rate, to mitigate increased costs on tenants.
- Also retail rentals are typically quoted in USD, resulting in the doubling of rentals in EGP terms.
- Retail tenants are currently facing numerous obstacles such as import restrictions, increased prices of imported goods and reduced demand from consumers because of high levels of inflation.
- The hotel and tourism industry is the only sector of the real estate market to have benefited from the currency flotation. Demand is expected to pick up, as Egypt has become 52% cheaper for foreign visitors.
As Egypt's economy turns a corner, what is the current market sentiment towards Egypt from the real estate sector?
Egypt's economic reform program is on track, thanks to aggressive measures taken by the government over the last year, and investors and developers have been responding positively to Egypt's resilience by continuing with existing projects and launching several new ones. According to property consultant, JLL, Cairo's property market has started to stabilize following a stretch of volatility due to the pound's devaluation. The stabilization is giving way to a positive outlook for 2018 and we believe that homebuyers and investors will respond with confidence. JLL advises that developers are continuing to invest in existing and new projects and flexibility is key when it comes to payment offers. With increased investor confidence, the residential market is approaching the bottom of its cycle paving the way for an overall improved market condition in 2018. At this year's Cityscape Egypt, we will be able to see market confidence as investors and homebuyers respond to a range of projects available at attractive prices.
In addition, the Egyptian government is aiming to fast-track the adoption of a new investment law to improve the investment environment in Egypt, which should further increase investor confidence and encourage the recommencement of some projects that are currently on hold. According to JLL, the law will aim to attract investment into real estate and other sectors by removing long standing bureaucratic obstacles. This is especially noteworthy for foreign investors. For foreign investors, the country has become more attractive post-floatation, with experts maintaining that the country has created a well-functioning currency market that is reflected in the pound's current rate, we're confident that this year's show will also attract foreign investors and Egyptian expatriates looking to purchase second homes. We have a multitude of exhibitors who will be speaking to this demand as they launch projects in some of the country's most sought-after coastal neighborhoods.
How important is the event CityScape for the real estate industry in Egypt?
Over the last six years, Cityscape Egypt has acted as a barometer for the real estate industry in the country; responsible for fostering partnerships and creating opportunities that drive development and investment across the country Our primary goal is to enable both local and cross-border real estate investment, which has the potential to shape the future of the real estate industry, as well as facilitate a knowledge-based dialogue that tackles the sector's most pressing needs The demand for housing in Egypt remains a central issue, Cityscape Egypt will connect the country's residential developers with a vast number of potential homebuyers and investors. It is important to note that the effects of the devaluation in 2017 and subsequent float have been varied, but experts have revealed that it has caused a boom in the housing market as more people lean towards residential real estate as one of the few remaining stable investments. Due to Greater Cairo's burgeoning population of more than 20 mn roughly a quarter of Egypt's total population we have witnessed that demand for housing in the capital area continues to outstrip supply. There are many Egyptians who need quality housing from developers in the country and Cityscape Egypt will look at filling this gap. With 50% of Cairo's residents between the ages of 15 and 40, marriages are a large contributor to the demand for real estate as many seek homes of their own. According to Oxford Business Group, there are an estimated 900,000 weddings per year in the country and thus a major driver of demand in the residential market. Coupled with this, the rise in consumer confidence and attractive payment plans at the show all point to Cityscape Egypt being ideally positioned to facilitate real estate investment for investors and homebuyers