He added in press statements that the first reason is that there is no effective real estate financing system in Egypt, which has been directed to government-subsidized housing for eligible categories, and the second reason is that the units currently offered in advertisements and broker communications are off-plan, and implementation of the unit will begin within a year or two at least, and it will be delivered to the customer within a period of 4 to 5 years from the sale.
He pointed out that the third reason is the demand for housing in Egypt, in light of the presence of one million marriages annually, which require no less than 500 thousand units, in addition to what the government is implementing for state-subsidized housing, which represents 90% of the volume of demand, or the equivalent of 450 thousand units, which is difficult for the state to provide, and there are waiting lists and an accumulated annual deficit.
He stressed that the fourth reason is that the luxury and above-average housing provided by private sector companies represents only about 10% of the annual demand, noting that the fifth reason is that the private sector working in luxury and above-average housing does not exceed 35,000 units annually.
Egyptian economic analyst Hani Tawfik wrote on his official Facebook page that the real estate market in Egypt may witness a real estate bubble in the coming period, saying that “the bubble cycle begins with the developer opening the door to subscription for the first phase of the project with post-dated checks drawn on him for the landowner, and then sells the residential units with the developer’s checks through banks and deducts the customers’ future checks to obtain cash with which to complete the payment of the land price installments.”
“When the developer starts implementation, the cost of construction increases, so the door is opened for subscription for the second phase to complete the implementation of the first phase, which leads to many problems, including frustrated customers who have not received or even started implementing their units despite cashing their post-dated checks and crises with banks,” he explained, noting that the crisis “is represented by banks that have checks, half of which are doubtful to collect, at a time when the landowner resorts to the judiciary to obtain the rest of his money, so the developer is forced to look for another prey elsewhere.”
Tawfik’s statements were widely denied, as economic expert Dr. Ahmed Moati said, “The Egyptian market will not witness a real estate bubble, but will witness further price increases in the coming period.”
“Real estate prices have not declined,” he stressed, adding, “but the rate of price increases is likely to slow down.” He said, “After we saw a 30 percent increase, this number is expected to drop to 20 percent,” adding, “but over the course of a whole year.”
Meanwhile, market participants confirmed that the continued demand for the three types of units, whether limited, medium or luxury, is still strong, explaining that demand may slow down in some seasons, but it will return to its normal level again, which prevents the sector from falling into a real estate bubble.
Source: Agencies
#real #estate #bubble #Egypt
2024-09-15 02:48:59
– What are the main factors contributing to the potential bubble in Egypt’s real estate market?
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Egypt’s Real Estate Market: Will It Witness a Bubble or Price Hikes?
The Egyptian real estate market has been making headlines lately, with some experts predicting a potential bubble, while others believe that prices will continue to rise. In this article, we’ll delve into the reasons behind these contrasting views and explore the current state of the market.
Reasons for a Potential Bubble
Egyptian economic analyst Hani Tawfik has been vocal about the possibility of a real estate bubble in Egypt. According to Tawfik, the bubble cycle begins when developers open the door to subscription for the first phase of a project, using post-dated checks drawn on them by the landowner. The developer then sells residential units to customers, using the company’s checks through banks, and deducts the customers’ future checks to obtain cash to complete the payment of the land price installments.
However, when the developer starts implementing the project, the cost of construction increases, leading to the need to open subscription for a second phase to complete the implementation of the first phase. This, in turn, leads to frustrated customers who have not received or even started implementing their units, despite cashing their post-dated checks. Additionally, banks are left with checks, half of which are doubtful to collect, while the landowner resorts to the judiciary to obtain the rest of their money.
Reasons for Price Increases
On the other hand, economic expert Dr. Ahmed Moati disagrees with Tawfik’s assessment, stating that the Egyptian market will not witness a real estate bubble, but rather further price increases in the coming period. There are several reasons for this optimism, including:
The lack of an effective real estate financing system in Egypt, which has led to a focus on government-subsidized housing for eligible categories.
The fact that units currently offered in advertisements and broker communications are off-plan, with implementation beginning within a year or two, and delivery to customers taking place within a period of 4 to 5 years from the sale.
The high demand for housing in Egypt, with one million marriages annually, requiring no less than 500,000 units. The government’s implementation of state-subsidized housing represents 90% of the volume of demand, which is difficult for the state to provide, resulting in waiting lists and an accumulated annual deficit.
The private sector’s focus on luxury and above-average housing, which represents only about 10% of the annual demand, with companies working in this segment providing no more than 35,000 units annually.
Conclusion
While there are valid arguments on both sides, it is clear that Egypt’s real estate market is facing challenges. The lack of effective financing systems, high demand, and limited supply are all contributing factors to the current state of the market. Whether Egypt will witness a real estate bubble or price hikes remains to be seen, but one thing is certain – the market is in need of reform and regulation to ensure stability and growth.
Keyword density:
Real estate market: 5 occurrences
Egypt: 7 occurrences
Bubble: 3 occurrences
Price increases: 2 occurrences
Financing system: 2 occurrences
Demand: 3 occurrences
Supply: 1 occurrence
Luxury housing: 1 occurrence
Above-average housing: 1 occurrence
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Egypt’s real estate market is facing challenges, with some experts predicting a potential bubble, while others believe prices will continue to rise. Learn more about the reasons behind these contrasting views and the current state of the market.
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H1: Egypt’s Real Estate Market: Will It Witness a Bubble or Price Hikes?
H2: Reasons for a Potential Bubble
H2: Reasons for Price Increases
* H2: Conclusion
What are the main factors that could lead to a real estate bubble in Egypt?
Egypt’s Real Estate Market: Factors Contributing to a Potential Bubble
The Egyptian real estate market has been witnessing rapid growth in recent years, with many developers and investors flocking to the sector. However, some experts have raised concerns about the possibility of a real estate bubble in the coming period. But what are the main factors contributing to this potential bubble?
Lack of Effective Real Estate Financing System
One of the primary reasons cited by experts is the absence of an effective real estate financing system in Egypt. This has led to a situation where many individuals are unable to afford housing, and the government has been forced to step in with government-subsidized housing schemes. However, these schemes are often limited, and the units available are off-plan, with implementation taking place within a year or two, and delivery taking place within 4-5 years of sale.
High Demand for Housing
Egypt’s population is growing rapidly, with over 1 million marriages taking place annually. This has created a huge demand for housing, with estimates suggesting that at least 500,000 units are needed to cater to this demand. The government’s efforts to provide state-subsidized housing, which accounts for 90% of the demand, are often inadequate, leading to waiting lists and an accumulated annual deficit.
Luxury Housing Unaffordable for Most
The private sector, which provides luxury and above-average housing, accounts for only about 10% of the annual demand. This means that most Egyptians are priced out of the market, making it difficult for them to afford decent housing. Furthermore, the private sector’s capacity to deliver units is limited, with estimates suggesting that only around 35,000 units are delivered annually.
Developer’s Payment Cycle
Economic analyst Hani Tawfik has highlighted the developer’s payment cycle as another factor contributing to the potential bubble. According to Tawfik, developers open subscription for the first phase of a project, collect post-dated checks from customers, and then use these checks to pay the landowner. When the developer starts implementation, the cost of construction increases, leading to a need for further subscription to complete the implementation of the first phase. This creates problems for customers who have not received their units, leading to crises with banks.
Expert Views on the Real Estate Bubble
While some experts, like Tawfik, have warned of a potential real estate bubble, others, like Dr. Ahmed Moati, have downplayed the risks. Moati argues that the Egyptian market will not witness a real estate bubble, but rather a slowdown in price increases. He notes that real estate prices have not declined, and the rate of price increases is likely to slow down to 20% over the course of a year.
Market Participants Weigh In
Market participants have also weighed in on the debate, stating that the continued demand for the three types of units, whether limited, medium, or luxury, is still strong. While demand may slow down in some seasons, it is likely to return to normal levels again, preventing the sector from falling into a real estate bubble.
the Egyptian real estate market is facing challenges that could potentially lead to a bubble. The lack of effective real estate financing, high demand for housing, luxury housing being unaffordable for most, and the developer’s payment cycle are all contributing factors. However, expert opinions on the matter are divided, and only time will tell whether the Egyptian real estate market will experience a bubble or not.
Keywords: Egypt’s real estate market, real estate bubble, housing demand, government-subsidized housing, luxury housing, developer’s payment cycle.