2023-06-22 20:38:03
SpecialEgypt
Real estate prices in Egypt are witnessing record highs, under the weight of the current economic challenges in light of the high inflation rates as part of the consequences of the geopolitical developments that imposed themselves on various countries of the world in varying proportions.
The repercussions of the crisis affect all parties to the system. While real estate companies face sharp criticism from those wishing to buy, the companies themselves suffer under the weight of the high prices of basic inputs (building materials), in addition to the record rises in interest rates at a time when many of these companies depend on financing. banking in its operations.
This turbulent scene leads to more instability in the real estate sector, which faces broad challenges, despite the increase in demand that is faced at the same time by weak purchasing power compared to the current price levels for both medium and luxury housing.
The same scene is also reflected in “rents”, which witnessed wide increases in various regions as well, especially in areas that witness influxes of expatriates or refugees.
Where does the real estate sector reach in Egypt? What are the prospects for price stability in the next stage? Is the sector facing the specter of stagflation? And other questions are being discussed by Egyptians who wish to return to levels before the current inflationary wave.
Where is the residential sector going?
For his part, the real estate expert, Eng. Abdul Majeed Jado, says in exclusive statements to “Economy Sky News Arabia” that the real estate sector suffers from high levels of prices, and those prices are not expected to decrease soon, in light of a group of factors associated with high inflation rates. widely in Egypt.
Egypt’s annual core inflation rate rose to 40.3 percent in May from 38.6 percent in April, according to central bank data. The basic consumer price index recorded a monthly rate of 2.9 percent in May 2023, compared to a monthly rate of 1.6 percent in the same month of the previous year, and a monthly rate of 1.7 percent in April 2023.
He refers to the rise in inputs (including the prices of building materials), which affected the rise in real estate prices, but at the same time he points to another reason that is not directly related to these conditions, related to what he described as “the whim of the seller” in reference to the wide increases imposed by real estate owners without The existence of a clear standard for evaluating the price of the property, which opens the way for different exaggerated prices.
With regard to the issue of high input prices, the real estate expert cites, for example, the rise in iron prices in the local market, reaching nearly 40,000 pounds per ton (the dollar equals 30.95 pounds), following it was only around 10,000 before the current inflationary wave.
And Jado added: “There is no fixed mechanism for evaluating housing units and the appropriate price for them in order to achieve a balance between the rights of the seller and the buyer, and accordingly it is necessary that this process be clearly legalized, in a way that guarantees the rights of the various parties in the sector, and in a way that also guarantees an appropriate margin for real estate trading.” (Buying it and selling it following a period to make a profit margin).
And he stresses that real estate owners are working on presenting some offers in order to facilitate the sale of units, including, for example, ten-year installment offers at times as part of attempts to find mechanisms to accommodate the current situation, and notes that some companies evaluate real estate according to the price of the US dollar. In order to avoid the pressures resulting from the decline in the local currency.
According to these rises, Jado points to the rise in rents as well, in light of the turbulent scene that the real estate market in the country is suffering from under the weight of the current inflationary wave, indicating that in light of the current record highs, “it is not expected that there will be a rapid decline… it takes time and requires more.” related measures to control the markets.
Inflation recorded sharp increases over the past year following a series of devaluations of the pound that began in March 2022, as well as a prolonged shortage of foreign currency and delays in releasing imports.
demand stability
In a related context, the economist, Dr. Hossam Al-Ghayish, explains in exclusive statements to the “Sky News Arabia Economy” website, that “in light of the depreciation of the Egyptian pound, real estate was one of the safe havens to direct liquidity, like gold and foreign currencies. They have financial surpluses to invest in real estate to preserve the value of their money following the decline in the value of the local currency.
The exchange rate of the Egyptian pound once morest the US dollar has declined by regarding 50 percent since March of last year. While Egypt was expected to resort to a new devaluation of the currency, before President Abdel Fattah El-Sisi finally hinted that it was unlikely to devalue the currency once more soon, in his statements during a youth conference, on Wednesday, he said that such a step would harm national security and citizens.
Al-Ghaish added, “The real estate sector is currently facing positive and negative influences. As for the positive factors, they are linked to the rates of demand for real estate, especially in the middle-class housing sector.”
On the negative side, which represents a challenge for the sector, he points out that “in the coming years in particular, the effects of this will appear clearly, and it is related to the dependence of many real estate companies on bank financing in planning and construction operations, and while interest rates are very high, this would It constitutes a great pressure on the budgets of those companies, which may push them later to sell real estate at low prices to provide liquidity in order to pay their obligations.. As for the companies that obtained financing – before the interest rate increased – they have already benefited from these low rates.
He believes that real estate prices are expected to witness a state of stability, but as for the luxury sector or luxury housing, “I think it will face some problems in the next stage.”
Real estate developer crisis
On the other hand, the real estate expert, Counselor Osama Saad El-Din, who is the Executive Director of the Real Estate Development Chamber of the Federation of Industries in Cairo, says in exclusive statements to the “Sky News Arabia Economy” website, that the various industrial sectors face a set of different challenges (in light of the consequences of economic factors the current), and the real estate industry in general is not immune from these challenges, especially since it is linked to a group of inputs from heavy industries.
However, he refers to the set of facilities granted by the Egyptian government to support real estate developers in order to overcome the stage of current challenges, and says: “As long as the state places its hand in the hands of real estate developers, the real estate sector will return to its levels of activity, especially since the need does not stop for real estate, while production is less.” It is required in the local market, despite the decline in financial capacity.
The Egyptian government adopts a special vision to maximize the participation of the private sector in the economy. To that end, it has taken a number of incentive initiatives that would overcome obstacles in front of investors, the latest of which was a list of 22 new decisions taken during the first meeting of the reconstituted Supreme Investment Council.
These decisions included legislative amendments to overcome land ownership restrictions and facilitate foreign ownership of real estate.
And he continues: “The real estate sector is recovering, and it will continue in this direction as long as the developer has the determination to continue investing, as well as the state supports it, and in the presence of a consumer who needs the property… Therefore, the availability of these three conditions would contribute to the recovery of the property.”
And he talks regarding the offers that some developers had to submit to stimulate sales, such as “installments over long periods,” expecting that trend to decline in the coming period, especially in light of the existence of what he described as “terrifying challenges” that may make the developer bear the price difference in the event of any occurrence. Various developments (with reference to prices and the currency exchange rate), especially in the residential sector, while those offers may continue in the commercial and administrative sector.
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