CAIRO: With several hundred housing blocks budding every year, Egypt’s property market is gaining momentum vis-à-vis regional and international markets, finds a recent global housing review.
“We believe Egypt is attractive . where prices are low by regional standards, gross rental yields are among the highest in the world, taxes are low, and transaction costs are reasonable, stated the Global Property Guide (GPG).
The guide reports that properties in Egypt are quite cheap from a foreigner’s point of view, ranging from $400 to $1,400 per square meter. Rental yields are also quite high. For instance, yields in Cairo’s Maadi district are typically in double digits, with earnings of up to 17 percent achievable on 250-square-meter apartments.
The guide also finds that Egypt’s tax environment is extremely accommodating, while the roundtrip transaction cost (total cost of buying and reselling a residential property) is quite moderate at around 11.7 percent.
According to GPG, Egypt’s property market is booming amid high forces of both supply and demand, mainly generated from regional and foreign investors. It listed four main factors for the ongoing market growth: “Egypt offers excellent rental income returns. The Gulf is now exploding with new oil money and sees Egypt as less risky than Lebanon or Jordan. Egypt has a rapidly growing economy with a fast-growing outsourcing sector. There is enormous European interest in Red Sea property.
The past two years, says GPG, have not seen strong price movements in upscale Cairo districts such as Maadi, Zamalek and Mohandiseen. Most price appreciation has taken place in new developments, such as Katameya Heights. The boom is also being felt in new developments on the Red Sea and the Mediterranean, which are opening up the country to large-scale European purchases at very low cost.
“The ‘big thing’ in Cairo over the past two years has been the coming of Emaar, Dubai’s best developer, which has launched the sale of Uptown Cairo [a $2.1 billion development project located in Mokattam Hills], the GPG said.
“Land prices in Katameya Heights have been pushed up to spectacular heights. The reason for the excitement is that in a city of crowded, run-down housing with only piecemeal developments, Katameya Heights was one of the first gated villages with a suburban concept, with its own luxurious clubhouse. The houses are surrounded with greenery, they are luxurious and prestigious, and they offer an escape from the chaos of Cairo.
For several years, Egypt’s real estate market talk has revolved around gated-community developments including Uptown Cairo, Al-Rehab City, Madinaty and Hyde Park, among others.
“It is not immediately obvious that these new developments are desirable investments, [as] prices have risen very high, the GPG pointed out. “Meanwhile, in the traditional expatriate areas, such as Maadi, buying prices have stalled, and they may present better value for money.
“A cautious, conservative investor might well conclude that Maadi’s low prices and high yields offer an investment opportunity, while Katameya’s high land prices are not supported by any clear profit prospects. On the other hand, Katameya Heights has momentum – the pull of the future – powering it; so it is a hard decision.
As the US and European housing markets slow down and weaken, the GPG finds that investors are increasingly exploring opportunities overseas. The depreciation of the US dollar against major currencies could be beneficial for the Middle East’s property markets. As the currencies of Gulf Cooperation Countries (GCC) are pegged to the US dollar, their property markets are getting cheaper as the US dollar depreciates – while everyone expects their currencies eventually to be revalued against the US dollar.
GPG’s forecasts for 2008 lean towards investing in real estate property in Egypt followed by Jordan, as far as the Middle East market is concerned. “Investors should avoid Dubai, because of the overhang of property due for delivery in 2008 and 2009, except possibly detached houses. The newly-opening Gulf countries such as Abu Dhabi and Oman could eventually produce good returns.
