(MENAFN- Daily News Egypt)
Egypt's Real estate market experienced substantial developments in 2024, as economic challenges intensified with fluctuations in exchange rates and rising inflation. These factors significantly impacted the purchasing power of citizens and investors. Despite these hurdles, the sector demonstrated resilience, supported by governmental measures such as easing access to real estate financing and incentivizing developers.
Demand patterns also shifted, with heightened interest in luxury housing and large-scale projects, while the resale market faced challenges stemming from high prices and low liquidity. Developers encountered difficulties in marketing their projects due to rising raw material costs and price increases but responded by introducing new designs and infrastructure innovations tailored to market needs.
This report highlights the key events and developments that shaped Egypt's real estate market in 2024, providing insights into the challenges and transformations defining the sector during the year.
Dollar Surges
In 2024, Egypt's real estate market was marked by notable developments and decisions, most prominently a steep rise in property prices. Inflation, increased construction costs, and the Egyptian pound's depreciation were primary drivers. In March, the Central Bank of Egypt floated the pound against the dollar to address discrepancies between the official exchange rate and the parallel market.
This currency flotation was accompanied by an unprecedented 6% interest rate hike, raising deposit rates to 27.25% and loan rates to 28.25%. These measures aimed to control inflation and attract foreign investment. The broader strategy included securing foreign currency liquidity through direct investments, such as the Ras El-Hekma deal, which injected $10bn into the economy.
Property prices surged by over 100% in some projects, with forecasts predicting a further 30% rise, totaling a 130% increase in key areas like New Cairo, the New Administrative Capital, and the North Coast. Rental prices also rose, with annual increases reaching 22% in West Cairo and 18% in New Cairo, driven by demand for real estate as a financial hedge amid market instability. Developers introduced flexible payment plans and promotions to stimulate demand, particularly during off-peak seasons.
Ras El-Hekma
The Ras El-Hekma project emerged as a landmark collaboration between Egypt and the UAE, with the New Urban Communities Authority (NUCA) partnering with ADQ Holding Company. This initiative aims to transform the Ras El-Hekma area into a global Mediterranean coastal destination.
With $150bn in total investment, including a $24bn commitment from ADQ, the project is set to create over 100,000 jobs in the construction and contracting sectors, reducing unemployment while significantly contributing to the economy. The Egyptian government is poised to receive 35% of the project's returns.
Market Facilitation
The Egyptian government introduced measures in 2024 to support developers amid economic challenges. These included direct land allocation mechanisms, reduced reservation fees for large-scale projects, extended project timelines by 20%, and installment payment postponements. Projects were deemed complete once 80% of work, including infrastructure and site coordination, was finalized.
For new cities, a six-month deadline extension was granted, easing pressures on developers. Additional incentives included flexible payment terms, competitive land prices, and opportunities to purchase extra time for project completion. These measures reinforced the government's commitment to stabilizing the real estate sector despite challenging economic conditions.
Resale Resurgence
The resale market experienced a sharp upswing in the first half of 2024, with rising primary market prices driving activity. Inflation, currency depreciation, and higher construction costs prompted many to view real estate as a safe investment. Some buyers capitalized on earlier purchases by reselling properties at higher prices for quick profits.
However, the second half of the year saw a slowdown. The Egyptian pound's devaluation led to hesitation among buyers awaiting price stabilization, while reduced purchasing power and the need for cash payments dampened activity.
Longer Installment Periods
In response to economic pressures, real estate developers have increased the duration of installment plans, making properties more accessible to a wider customer base. These extended payment options help reduce the burden of monthly payments, which in turn attracts more buyers. Developers have noted that this strategy both boosts sales and maintains liquidity, even though longer repayment terms carry higher risks. This trend reflects a broader shift in the Egyptian real estate market as it adapts to rising land and construction costs, as well as higher interest rates. The significant increase in property prices has diminished customers' purchasing power, prompting developers to extend installment periods to better align with clients' financial capabilities. This adjustment follows detailed studies of customer needs. Additionally, a lack of financing options for developers has contributed to this decision, as companies face challenges in securing funds, affecting their ability to meet project deadlines. To accommodate buyers, developers are committed to offering flexible payment solutions, which include down payments of just 10% and extended installment periods of up to 8 years or more, along with cash discounts for purchasers.
More Offers
Recently, real estate companies have started providing various promotions to their clients, including flexible installment plans and additional perks, in response to the high prices at which units were sold during the previous period. Many developers, both large and small, have introduced these offers as a countermeasure to price hikes. With a decrease in construction input costs, developers are revisiting some of the promotions that had disappeared during months of high inflation. For example, developers are now offering benefits such as upgrading units from B grade to A or A+ grade, or even providing full finishes when the contract initially specified a non-finished or semi-finished unit. Some companies have extended payment periods to as long as 10 or 12 years, while others are giving substantial discounts on finishes and contracts. Currently, the market is experiencing a slowdown; although it is not a full recession, it represents a period of relative calm in purchasing activity. In response, companies are advertising new sales advantages to attract a larger customer base, as other developers are offering competitive prices in their new launches.
Exceptional Sales
According to a report by“The Board Consulting,” the total sales of the top 10 real estate companies in Egypt set a new record, reaching EGP 1trn in 2024. This marks a 203% growth compared to the same period last year, reflecting strong demand and significant expansion in North Coast projects. The sales of the top 10 developers in the North Coast exceeded EGP 500bn during the first nine months of the year, accounting for approximately 53% of total sales in the real estate sector across all regions, surpassing sales in both the New Administrative Capital and other areas.
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