Middle Eastern Sovereign Wealth Funds are set to invest $120 billion into Egyptian real estate in the coming years. This is according to Knight Frank's recent Africa Horizons report highlighting the strong growth prospects of the Egyptian real estate market.
GROWING REAL ESTATE MARKET IN EGYPT
Egypt currently boasts around 150 million square meters of active real estate. This paired with the country's rapidly increasing population of 110 million people gives the Egyptian residential real estate market strong upside potential.
HIGH DEMAND FOR RESIDENTIAL PROPERTY
The residential sector remains a prime target for investment. In 2022, Cairo saw a notable $20 billion worth of real estate investments, with $16 billion dedicated to residential properties. So, the average price of residential properties in Cairo surged by 10%, reflecting strong investor interest.
FOREIGN INVESTMENT AND GROWING DEMAND
Egypt's real estate market has become an attractive option for preserving savings due to the local currency's depreciation. Recent legal changes allowing foreigners to own property in Egypt have also boosted demand from international buyers and Egyptian expatriates seeking competitive property prices.
PROPERTY PRICE INCREASES
Apartment prices in New Cairo have risen by 24% year-on-year, reaching approximately $450 per square meter, while villa prices grew by 8.5% to $690 per square meter. Similarly, in Sheikh Zayed City, apartment prices rose by 27.8%, hitting around $430 per square meter. Villa rates increased by 2.1%, reaching $625 per square meter during the same period.
AFFORDABILITY CHALLENGES
Given the country's hyperinflationary environment, affordability is a key concern for most buyers. The headline inflation rate stood at 36.8% as of June 2023. So, around 60% of current residential demand focuses on small-sized apartments. This demand shift is attributed to the rising cost of living and increased interest rates.
DEVELOPERS ADAPTING TO DEMAND
To mitigate escalating construction and completion costs, developers often offer semi-finished or shell and core projects, particularly for townhouses and twin houses. This approach aims to control costs and provide savings to buyers and investors. In response to market trends and the devaluation of the Egyptian pound, developers are reducing development finance payment plans from 14 years to an average of 7-8 years.
MARKET OUTLOOK
Although demand is strong for Egypt's residential real estate, Knight Frank projects an upcoming period of slower growth. This is due to the weakened pound, rising borrowing costs, and hyperinflation, affecting consumer confidence. Ongoing real estate projects are also facing delays. Caused by hyperinflationary costs, this is prompting heightened demand for resale and completed properties, which saw a 30% YoY increase during Q2 2023.
SECOND HOMES MARKET & CAPITAL APPRECIATION
The second homes market, particularly summer homes on Egypt's North Coast, is expected to see strong demand in the short to medium term. Capital appreciation potential, appealing rental yields in foreign currencies, and rising interest from GCC buyers contribute to this trend.
GROWING INTEREST FROM GCC BUYERS
GCC nationals have shown a growing interest in Egypt's North Coast real estate market. Factors such as currency depreciation, pleasant summer climate, and entertainment options have contributed to this demand surge. Chalet prices on the North Coast range from $950 to $3,000 per square meter, while villa prices vary from $1,450 to $3,550 per square meter in high-end developments. Summer home sales reached $2.1 billion in 2022, with a projected 30% increase in 2023.
STRONG POTENTIAL IN EGYPT'S RESIDENTIAL MARKET
The Egyptian residential real estate market showcases remarkable growth potential. Foreign investment, affordability considerations, and shifting demand patterns are shaping this landscape. Notably, the second homes market, with its capital appreciation prospects and GCC interest, is a promising avenue. So, investors could capitalise on the market's evolving dynamics, focusing on affordable units and second home opportunities to maximise returns in Egypt's growing real estate sector.
