Demand for real estate assets in Egypt is real. Whether it is for hedging, investment or personal use, Egyptians like to buy property and the proof is in the paper. As of late, the luxury market too is seeing a surge in activity, with both local and Gulf investors driving sales — and prices — up. But, as construction costs rise, inflation bites, and the threat of further currency depreciation looms, can the real estate sector sustain its momentum while overcoming these economic pressures? Are we looking at the early signs of a potential bubble? And, can developers keep pace with hot demand while addressing affordability and pricing challenges?

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We gathered a number of key real estate players during this year’s EnterpriseAM Finance Forum — we spoke to Ayman Amer, general manager of SODIC, Dasha Badrawi, executive vice chairman of Marakez, and Ibrahim El Missiri, CEO of Somabay, about the ins and outs of the Egyptian real estate market.

Ras El Hekma has been a game-changer for Egypt’s real estate market. This year, brokers from the UAE and Saudi Arabia ramped up efforts to market and sell their projects here, Amer said. “After the announcement of Ras El Hekma, everything changed. The focus of the whole world has shifted to the North Coast.” Badrawi echoed this sentiment, noting that Ras El Hekma is one of the “two big events the North Coast has seen this summer,” which alongside the TMG project, significantly boosted demand for property in the coastal city.

The North Coast’s growing appeal to Gulf investors has brought with it skyrocketing prices. Property rates have surged to dizzying heights, with Ras El Hekma driving much of the upward momentum.“Room rates have jumped to USD 3k or more per night for some villas,” Amer said, pointing to the influx of foreigners driving up demand for luxury spots along the coast, with some villas going for USD 11k-14k per night, he added.

Rest assured, there is no bubble: Despite perennial concerns about a potential real estate bubble, our panelists were quick to dispel the idea. “There’s no bubble for too many reasons,” Amer said, citing a significant mismatch between supply and demand. Developers are struggling to deliver enough units to keep up with the country’s housing needs. El Missiri agreed, adding that while there had been a “demand bubble” fueled by speculative investments, the market has since shifted back to real, sustainable demand. Population growth, limited supply, and steady purchasing power continue to support the market’s upward trajectory, leaving little room for a price bubble.

The demand metrics are solid: Egypt’s real estate market is propelled by a powerful combination of cultural and economic dynamics. “With a population of 120 mn, people are constantly looking to buy real estate, not just for themselves but for their children as well,” Amer said. Throw in a rapidly growing population to the mix, and the demand metrics are pretty solid.

Prices vs. affordability: As prices continue to rise, so do concerns over affordability. According to Amer, “prices have increased between 200% and 300% over the last three years,” and that’s got buyers and developers feeling the pinch. Inflation and rising construction costs are at the root of these massive hikes. But there’s another kicker, “local salaries haven’t kept up with the float of the EGP,” Badrawi said. This mismatch between earnings and property prices is making it tough for many Egyptians to keep up, prompting more people to consider extended payment plays — or join the growing crowd of renters.

Renting may just be the new buying: Long-term rentals are becoming an increasingly common option for Egyptians who can no longer afford to buy property. “Twenty percent of properties in West and East Cairo are now rented, which is a significant shift,” Amer said, adding that some renters are shelling up to EGP 35k per month for homes, while bigger houses are renting for up to EGP 150k.

Looking from the outside in: Both Amer and El Missiri pointed out that Egyptian real estate remains relatively affordable compared to international markets. We’re still far behind in terms of price per square meter compared to global markers, El Missiri said. While the average price per square meter in Egypt is USD 2-3k, it’s between EUR 5-18k in Greece, El Missiri said — “We have a long way to go in terms of price points.” More can be done to make Egypt more attractive to foreign tourists and investors, Badrawi said, pointing to better infrastructure, hospitality, and transport services.

Time to look abroad: “Anywhere between 30% to 35% of our homeowners [in Somabay] are from abroad — not just Egyptian expats but also foreigners,” El Missiri added. The region’s proximity to Saudi Arabia and potential to attract international buyers could significantly boost Egypt’s real estate sector in the coming years.

Now is the Red Sea’s moment to shine: The Red Sea region is poised to become Egypt’s next major real estate hotspot. “The Red Sea is coming,” El Missiri said, predicting that developers will soon begin acquiring land there due to its superior infrastructure and connections compared to the North Coast.

The institutional investment gap: While individual and Gulf buyers continue to drive demand in some places, institutional investment remains a largely untapped opportunity in Egypt’s real estate sector. “There are simply not enough institutional opportunities,” Badrawi said, pointing to the lack of recurring revenue assets and regulatory hurdles preventing institutional investors from fully engaging with the market. Amer also called for more regulation and transparency to attract larger pools of institutional capital. We need to create a more transparent and competitive environment if we want to attract significant institutional investment, he said.

Is luxury the new hot ticket? Egypt’s luxury market is growing across the board, with respect to different buyer profiles and price points, according to Amer. High-end products accounted for some 70% of SODIC’s sales this year, he said. “There are many buyers who can afford these high-end products, and they are actively seeking them out when the right unique selling propositions are in place.” This trend is borne out by the numbers — SODIC’s latest luxury development on the North Coast, Ogami, raked in a record EGP 20 bn in sales within just a week of its launch.

The challenges are just as real as the demand: Rising construction costs, inflation, and potential fuel price hikes could disrupt the sector’s momentum. “If the USD stabilizes at EGP 50-55, then real estate prices will rise by around 12% to 15% — something we expect as part of the normal course of the market,” Amer said. But, as El Missiri warned, if subsidies on fuel are removed, “construction costs could go through the roof.” To cope with these pressures, developers will need to adopt flexible pricing models and adjust to the shifting economic landscape.

About the secondary market: In addition to inflationary pressures, the secondary real estate market faces its own set of challenges, according to Badrawi. Secondary unit holders are struggling to compete with developers who offer extended payment plans, putting strain on individual sellers. “The units that do move in the secondary market are usually in communities that are already built and thriving,” Badrawi said, pointing out the liquidity issues and payment term competition could force many to liquidate properties, further flooding the secondary market.

The long-term outlook for Egypt’s real estate sector remains positive. El Missiri stressed that the fundamental demand for housing will persist as Egypt’s population grows and income levels adjust to new economic realities. “We’re going back to real demand,” he said, “and as people’s incomes adjust, the market will stabilize.” Ayman reinforced this optimism noting that with a shortage of supply and a growing middle class, there is little reason to believe that the sector is facing a bubble.

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