As the largest project market in Africa and the third largest in the Middle East and North Africa (MENA), Egypt’s construction industry is poised for consistent value growth until the end of the decade, according to JLL’s latest Egypt Construction Market Intelligence Report.
Key findings from JLL’s Q1 2024 report, based on trends from the latest Mordor Intelligence study, indicate that the growth forecast for Egypt’s construction industry is estimated to exceed 8% (compounded annual growth rate) until 2029. This growth is driven by increased government spending, active public-private partnerships, the rise of green buildings, infrastructure development, and continued investments in residential and mixed-use sectors.
Insights from industry sources reveal that despite economic challenges, Egypt holds a share of $515bn (12%) of the total pipeline value of unawarded projects in the wider MENA region, projected to reach $3.9trn. Egypt’s residential projects account for around $36bn (21%) of this share, while mixed-use projects contribute $115bn (22%).
In Q1 2024, Cairo’s residential sector demonstrated resilience, with over 7,000 units completed primarily within masterplan developments. The total stock now stands at approximately 276,000 units, and an additional 24,000 units are expected to be delivered throughout 2024. JLL Research reports an 83% year-on-year increase in average sale prices in 6th October city, along with a 42% rise in rental prices. New Cairo shows even greater growth, with average sale prices up by 95% year-on-year and average rents increasing by 43%.
Egypt’s tourism sector also saw promising growth in 2024, bolstered by a new initiative involving a substantial EGP 50bn investment to enhance the high-growth sector, building on its record performance in 2023 when it welcomed nearly 15 million visitors. The government introduced loan facilities and incentives to boost private sector participation, and to increase hotel capacity by nearly 250,000 keys to accommodate 30 million visitors by 2028.
While Cairo’s total hotel stock remained at 26,700 keys in Q1 2024, new and renovated hotels expected to open later in the year will add approximately 1,400 keys to the current stock.
Laura Morgan, Market Intelligence Lead MEA, Project & Development Services at JLL, highlighted the impact of currency volatility, inflation, and geopolitical challenges on Egypt’s construction sector. However, increased FDI commitments and strategic government reforms are bolstering investor confidence, positioning Egypt as a leading market in the region, aligned with its Vision 2030 goals.
Morgan said: “Currency volatility, inflation, regional and global geopolitical challenges are impacting market dynamics in Egypt, and the parallel market for the US dollar is leading to further price manipulation and greater market instability in the country’s construction sector. However, increased FDI commitments provide ample liquidity, and strategic government reforms are reducing market speculation, helping boost investor confidence. Drawing on the strengths of its tourism sector and in line with its Vision 2030 goals, Egypt continues to expand its construction sector through continued investments and partnerships to solidify its position as a leading market in the region.”
Egypt’s government has been accelerating efforts to address macroeconomic pressures to stabilise both market volatility and devaluation of the local currency, stated the JLL report. The Egyptian currency underwent its fourth round of significant flotation against the USD in March 2024 following which the Central Bank of Egypt (CBE) liberalised the exchange rate to attract foreign currency and combat record inflation. Although CBE secured a new $8bn loan agreement with the International Monetary Fund (IMF), its control over the exchange rate and limitations on foreign currency transactions led to the emergence of a parallel market for USD, leading to market imbalances and speculation by material suppliers.
Ahead of the currency liberation, Egypt secured its largest-ever Foreign Direct Investment (FDI) deal, injecting $24bn into the market and offsetting $11bn of debt through a local currency payout for the Ras El Hekma deal with the UAE. In addition, Egypt received over $20bn from international institutions and development partners to support its economic reform programmes.
These financial injections are expected to ease the country’s economic burdens and position Egypt as an appealing destination for future investments, said the JLL report.
While rising oil prices in Q3 2023 led commodity prices in Egypt to experience a 5% increase, the World Bank predicts oil prices to average $81 per barrel in both 2024 and 2025.
Ongoing currency fluctuations, speculation by suppliers, and inflation are leading to significant price increases for imported construction materials and locally manufactured materials with imported raw materials. However, following the liberalisation of the exchange rate in March, construction material prices have relatively cooled.
JLL has observed fluctuations in prices for key construction materials with rebar prices witnessing a 41% year-on-year increase, copper cables rising by 112% year-on-year, and aluminium sections experiencing a 32% increase.
