CAIRO: Against a global background of house price slumps and the great Western recession, those ubiquitous vistas of real estate projects that dominate the Egyptian horizon might now seem in jeopardy.
There are fears asunder that Egypt’s property bubble may be about to burst into a kaboom of bricks and mortar.
However, Ahmed Sabbour, managing director of Al-Ahly (now Al-Arabia) real estate company, has no doubt that Egypt’s property market is in better shape than ever.
Having completed the usual interview formalities, I posed the question of whether Egypt’s bubble will, sooner or later, pop. But, Sabbour’s first priority was to swiftly dispel the property apocalypse myth entirely.
“For a start, it’s not a bubble, and I don’t like to use the term bubble. If we look back to Dubai, in the past few years everybody said it was going to slow down and the bubble is going to burst. But nothing has happened.
“The only thing that happened in Dubai was in 2006, when it did slow down slightly, but only after an increase in over 100 percent. It decreased 20 percent in 2006, but then went up 40 percent in 2007. That’s still a 20 percent growth in two years.
“What I’m saying is that it’s healthy to slow down because that’s how the market gets re-activated again. When it slows down, people take the opportunity to start buying at lower prices. Then it starts going up again, so they sell, making money and they will buy again, running a cycle. I didn’t see a crash in Dubai, and I do not see it happening in Egypt at all. A slow down may happen in a few products of real estate due to saturation of the market.
“I see a slow down in the ultra-expensive villas of LE 7-8 million that have been selling very well in the past three years. Instead of a 30 percent annual increase, it may be 7 or 8 percent. There’s no problem in that, they’ll start to plateau out. What we’ve been experiencing the past few years was not normal, it was amazing.
But Sabbour blames certain players in the real estate market for being over-optimistic. “Part of the fact that the slow down has happened is because some real estate companies made a major mistake. They started to raise their prices dramatically. There’s a boom and the market accepted it, but they shouldn’t have over-increased their prices. This slowed down the market.
The apartments, however, according to Sabbour, will keep going strong. With an ever increasing population, Cairo is seeing a class of family seeking a quiet suburban life. Isolated from the conveniences an established hub has to offer, there is great potential for developing commercial property in these commuter mini-cities.
Indeed, Sabbour attributes the tenacious strength of the real estate market to increased wages in certain niche sectors of the private sector. “In the past three years, the upper and middle management of different companies, such as multi-nationals and banks, has increased a great deal, allowing them to invest in property. The government has gone through some positive changes, leading to more foreign investments, which by default has led to higher salaries.
Al-Ahly, one of the biggest local players in the Egyptian property development sector, is a joint venture between the National Bank of Egypt and the Sabbour family group, who own one of the largest engineering and consulting firms in Africa and the Middle East. Their projects have targeted prime spots in Egypt, including the luxurious residential development Katameya Hills and the tourist hotspot Sharm El-Sheikh.
“When it comes to residential property, the majority of buyers are native Egyptians. But in tourist locations such as Sharm El-Sheikh, at least 75 percent are foreigners, with a 90 percent British nationality, says Sabbour.
Yet there are those that suspect that the global rise in gated compounds and luxury housing for the ultra rich is a symptom of the widening gulf between the rich and the poor, and that as the rich move out to their lily pads, the poor will become incarcerated in inner cities.
“I can’t see this happening, says Sabbour, “Egypt is undergoing some great economic development, but I am hoping that poorer people feel the growth in the economy before it’s too late.
Sabbour sees a bright future not only for the Egyptian property developers, but for those looking to invest in housing, especially first time buyers. In the past few years, the mortgage concept has made a breakthrough in the local market, with over six Egypt-based mortgage companies open for business so far.
“We used to sell direct, without a mortgage system, but about six months ago we began to start using the mortgage system; but in my opinion, it needs to be implemented much more aggressively. If the mortgage system really develops we’ll never have to worry about a potential crash.
“What is more, mortgages will make it much easier for newlyweds to buy their first home relative to [their] income. When they have children, they may want to get a bigger house. The mortgage makes the process of acquiring a house a much easier and much quicker.
