When it comes to infrastructure investments in Egypt, real estate remains king: The devaluation of the EGP over the past several months and rising inflation have led consumers to pour their savings into real estate, spurring demand and encouraging further investment in the sector and its infrastructure, according to a Knight Frank report (pdf). International buyers and Egyptian expats have also been looking to take advantage of recently-introduced amendments that lift the current cap on the number of properties foreigners can own, allowing them to purchase as many properties as they like, the report says.

A lay of the land: Egypt has some 185 mn sqm of “active real estate” across the country, according to the report. Residential and mixed-use real estate projects from private sector developers worth c. USD 309 bn were under construction across Egypt in 1Q 2023, accounting for around half of all real estate projects and 83% of real estate investments, according to a recent report from real estate intelligence firm Property Finder. By Knight Frank’s count, Cairo alone saw USD 20 bn in real estate investments in 2022, with USD 16 bn of those poured into the residential sector, which “continues to be the focus of investment.”

Price points in the capital: Knight Frank’s data indicates that sales prices for New Cairo apartments are currently around USD 450 per sqm, with villa prices standing at some USD 690 per sqm. Across town, Sheikh Zayed apartments are valued at USD 430 per sqm and villas stand at USD 625 per sqm.

The second home market is also booming: Summer homes — particularly on the north coast — have seen “sustained strong demand,” with Knight Frank expecting this trend to continue in the short to medium term. Summer home sales reached USD 2.1 bn in 2022, according to the report, which forecasts a 30% increase this year.

Part of that demand is driven by tourism from our friends in the Gulf: Summer homes are seen as an attractive investment, seeing as they bring in high yields on rent and have high potential for capital appreciation. Additionally, Gulf tourists have been steadily pouring into the country, particularly during the summer, which is further driving demand, according to Knight Frank. “In the past few years, there has been a growing interest from GCC nationals in the real estate market on Egypt’s North Coast. This increased demand can be attributed to a combination of currency depreciation and the pleasant summer climate that the North Coast offers in contrast to the hot weather in GCC between June and September,” the report notes.

Price points on the coast: North Coast chalet prices are estimated to start at somewhere around USD 950 per sqm, rising to USD 3k per sqm “for premium units in high-end developments,” according to Knight Frank. Villas on the higher end of the price spectrum range between USD 1,450-3,550 per sqm, the report says.

But there are financial constraints on consumers: “Affordability remains a significant consideration for most buyers due to the country’s hyperinflationary environment,” Knight Frank says. Annual urban inflation came in at 36.5% in July, its highest rate on record. “Unsurprisingly, around 60% of the current residential demand is focused on small-sized apartments as buyers grapple with the soaring cost of living as well as rising interest rates.”

…and rising costs for developers to grapple with: Developers are taking a more “cautious approach” amid soaring construction and finishing costs, leading them to sell new projects as either semi-finished or “shell and core” as they look to cut down on expenses, the report says. The inflationary environment has also led developers to face delays in constructing and completing their projects, leading to a 30% y-o-y rise in demand for resale properties, according to the report.

Your top infrastructure stories for the week:

  • A new package of incentives for industrial projects: President Abdel Fattah El Sisi called for fresh tax breaks, discounts on land prices, and an expansion of the single-approval “golden” license in a bid to accelerate projects in priority industrial sectors.
  • Construction starts on Luxor strategic warehouse: The government broke ground on its EGP 1.5 bn strategic warehouse in Luxor.
  • Medlog to take over Tenth of Ramadan dry port: Medlog, the cargo subsidiary of Italy’s Mediterranean Shipping Company (MSC), has inked a contract with the government to design, construct, operate, maintain, and finance the new Tenth of Ramadan dry port and logistics center.
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