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The world has seen quite an eventful year in 2023, particularly from an economic perspective, with two of the largest US banks shutting down due to liquidity crisis early in the year, world gold prices breaking an all-time high, EU imposing carbon tariffs on imports, the US Federal Reserve raising interest rates and finally the devastating Gaza war with its consequences on supply chains as a result of boycotts and the attacks on the Red Sea’s arterial shipping route. These events had inevitable ramifications on the global economy, including one of the largest, most sensitive economic sectors worldwide: real estate.
In recent statistics, the real estate market worldwide was expected to reach a staggering value of US$637.80 trillion by 2024, according to Statista data. Egypt’s real estate sector alone accounted for $18.04 billion of the global real estate market in 2023, maintaining a rather steady pace despite its vulnerability. The real estate activities and construction sectors both contributed about 18.6 percent to Egypt’s total GDP in fiscal year 2021/2022, reflecting the paramount importance of this sector for the country’s economy. But how resilient can this sector remain amidst the unprecedented rising prices?
A reassuring undying appetite for real estate
It’s no secret that Egyptians, whether individuals or investors, still prefer real estate as a saving vessel, and this isn’t expected to change any time soon. A survey in Invest-Gate’s Market Watch Report for December 2023 – February 2024 demonstrating the trends of Egypt’s purchasing power has shown that 67 percent of the participants have a true desire to purchase real estate despite the rising prices, with the highest demand being on residential units by 34 percent, followed by commercial units with 26 percent, second homes for a household with 22 percent, and administrative units with 18 percent.
Mostafa El Beltagy, co-founder and CEO of Nawy Real Estate, said that last year his company observed a 65 percent increase in the average unit price; however, all the sales in the market increased by at least 70 percent.
“People in Egypt view the real estate sector as a safe haven for investment, so investing in real estate will likely continue. It’s part of people’s culture and it’s proven to protect them against the macroeconomic challenges we’re facing right now,” said Ayman Sami, Country head of JLL MENA, the renowned services firm specialized in real estate and investment management. He added, “It is a way of protecting your savings and passing on your wealth to the next generations.”
For his part, Mohamed Kesseba, CEO of Right Shift Consulting and senior director of programs at the AUC School of Business Executive Education, believes that the real estate market in Egypt will continue to exhibit signs of growth and recovery, and he has reasons behind this belief. “The Egyptian real estate sector’s performance is one of the hottest investment opportunities in our country. A lot of real estate developers have achieved a staggering increase of over 100 percent in sales value in 2023 over previous years. This indicates that investors still exhibit an appetite for real estate,” he said.
Kesseba noted that many attribute this surge in investment to the ‘changes’ in exchange rates. “This prompted a lot of people to think of real estate as a hedge for inflation, despite the significant increase in price. Foreign investors are one of those people who could be seeing Egypt’s market as an opportunity to enhance the value of real estate investments,” he added.
The data transparency dilemma
While all these evidence-backed speculations sound optimistic, in order for Egypt’s real estate sector to truly flourish, a few points have yet to be crossed off a long checklist, and data transparency is one crucial item on that list.
Real estate data transparency is defined as the free flow of information and fair and consistent application of local property laws. According to JLL’s Global Real Estate Transparency Index, countries are grouped into five different categories: highly transparent, transparent, semi-transparent, low transparency and opaque. Egypt, and most of the Arab world, are on the “semi-transparent” scale, indicating that work needs to be done in that area.
But why is transparency in the real estate sector specifically important?
Sami answers, “Because ‘data’ is important. Without having the right data, it’s very hard to analyze and come up with the right assumptions for businesses. We’ve seen a strong correlation between transparency and investments. The higher you rank on the scale of transparency, the more investments you have,” Sami explained. “That will attract more FDIs into the country and ensure a lot of real estate transactions take place,” he added.
The perfect scenario
When all is said and done, what is the Egyptian real estate market looking at in the short-term? Some suggest that the perfect scenario is, luckily, not very far from reality; though it must be approached cautiously.
Egypt’s real estate market will continue to grow, albeit steadily and carefully. The growing population will keep creating demand for housing and infrastructure – a globally well-known real estate development driver. Consequently, a lot of potential might be awaiting Egypt’s real estate market in the next few years. “Egypt has amazing demographics. 65 percent of our population is young people under the age of 35,” said Tarek El Gamal, founder and chairman of Redcon Construction, implying that consumer demand driven by Egypt’s growing young population will sustain the sector’s growth.
The Ras El Hekma project is also expected to create a boom in the sector’s injected FDIs, according to Prime Minister Mostafa Madbouly who expects about $150 billion to be injected just within the framework of this mega project.
For his part, Saud Al Quaifil, CEO of Enma Al Rwabi Developments, believes that the top challenge for people and investors from an FDIs perspective is the currency change and how people can maintain the same value all while benefiting from investing in the real estate market, especially after the Ras El Hekma project. “I think investments in the North Coast will likely grow in the coming period, given the attention that this destination is currently receiving,” he added.
With cautious optimism, industry experts believe that the Egyptian real estate market is on the cusp of a positive outlook. A sustained positive growth is anticipated, despite the price escalation, but would the consumer demand withstand the hike in prices? We can only wait and see.
