Real estate market experts unanimously agreed that the Central Bank of Egypt’s (CBE) decision to liberalise the exchange rate of the EGP against other foreign currencies will significantly affect real estate prices during the coming period.
They added that it will also bring about a state of confusion among real estate companies that were able to sell their projects before the construction phase.
On Thursday, the CBE’s Monetary Policy Committee (MPC) raised the key interest rates in an unscheduled meeting by 2% (200 bps) to reach 13.25%, 14.25%, 13.75%, and 13.57% for the overnight deposit rate, the overnight lending rate, the rate of the main operation, and the discount rate, respectively.
Ahmed Al-Shenawy — VP of the Sustainable Development Committee at the Egyptian Businessmen Association — stated that the current economic conditions that the world is going through necessitated some urgent measures to contain the successive economic crises.
He added that the liberalisation of the exchange rate and the hike in interest rates — besides some other decisions announced by the government recently — would affect the real estate sector given the incoming spikes in the prices of construction materials.
He also expects that the CBE’s decision to hike the interest rates and issue savings certificates with an interest rate of 17.25% would not affect investment in the real estate sector for one main reason, which is that the certificates are annual and not monthly or quarterly, and thus real estate remains the safest and most valuable long-term investment.
Furthermore, Al-Shenawy pointed out that the liberalisation of the exchange rate will certainly affect the prices of building materials during the coming period, and therefore there will be an increase in the price of properties.
“However, we will not be able to determine the percentage of the increase now, especially since the entire market is still waiting in anticipation of the outcome of the recent economic decisions taken by the state,” he said.
He also projects that the current and last quarter of this year will witness hikes of no less than 10% of the value of real estate units of all types, in addition to an expected slowdown in market sales.
He further disclosed that the problem is not in buying and selling, but in inflation after liberalising the exchange rate and whether there will be a new increase or not.
Additionally, Al-Shenawy said that there are some proposals and solutions that could help the real estate sector, and the state needs a number of decisive decisions to overcome this stage, especially since the real estate sector is an important strategic economic sector that contributes to the country’s GDP and is able to attract hard currency and attract local and foreign investments as well.
Moreover, he suggested that there should be homogeneity and balance between mechanisms of offering land by the New Urban Communities Authority (NUCA) and the multiplicity of methods of offering and selling land to match the way companies sell to customers.
This is besides considering different ways to contain the burden of the land instalments crisis and provide various and different payment methods for longer payment periods for lands ranging from seven to 10 years with down-payments not exceeding 10%.
He also called for increasing land offerings in the system of partnerships with the private sector and fostering cooperation with all categories of companies — whether small- or medium-sized — pointing out that partnerships are limited to large companies, which represent only 30% of the total number of companies operating in the sector.
Additionally, he called for classifying property companies according to their financial and technical capacity, and thus this decision will reduce a large part of financial burdens on companies through the state’s contribution to in-kind shares of the project.
Furthermore, Al-Shenawy stressed the need for financing and executive bodies — whether for individuals or companies — and working to provide decent fully finished housing units at an appropriate cost for all segments of society in order to achieve Egypt’s 2030 Vision’s for new urban development.
For his part, Mohamed Al-Bostany — President of the New Cairo and New Capital Developers Association — stated that the decision to liberalise the exchange rate contributes to setting a real value for the EGP against the USD and other foreign currencies, which directly contributes to attracting foreign investments to Egypt.
Al-Bostany added that the decision is one of the main solutions to address all problems that the Egyptian economy has been suffering from in the recent period and one of the main tools of the economic reform programme.
He explained that the decision to liberalise the exchange rate will indirectly contribute to creating a boom in the real estate sector and an increase in sales due to citizens’ resorting to maintaining the value of their investments and savings, adding that it is a real tool to activate property export.
He also revealed that the New Cairo and New Capital Developers Association will meet soon to discuss the current situation in light of the flotation decision, the position of projects that were sold out before construction, the position of the projects that will currently be offered for sale in terms of pricing, in addition to studying the position of customers’ purchasing power and its impact on companies’ sales.
Similarly, Emad George — Deputy CEO at Al-Ahly Sabbour Development — said that the decision to liberalise the exchange rate will be reflected in the prices of construction materials, whether steel, cement, and other building finishing materials, which consequently will raise the total cost of projects.
He also expects that the decision would affect the entire market and lead to an expected increase in prices, including real estate, explaining that the expected increase would range between 10 to 15% during the coming period.
