{"id":605382,"date":"2023-08-30T00:00:00","date_gmt":"2023-08-30T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/with-inflation-depreciation-real-estate-remains-an-investment-favorite\/"},"modified":"2023-08-30T00:00:00","modified_gmt":"2023-08-30T00:00:00","slug":"with-inflation-depreciation-real-estate-remains-an-investment-favorite","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/with-inflation-depreciation-real-estate-remains-an-investment-favorite\/","title":{"rendered":"With inflation + depreciation, real estate remains an investment favorite"},"content":{"rendered":"

When it comes to infrastructure investments in Egypt, real estate remains king: <\/strong> 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)<\/a>. International buyers and Egyptian expats have also been looking to take advantage of recently-introduced amendments<\/a> 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. <\/p>\n

A lay of the land: <\/strong> Egypt has some 185 mn sqm of \u201cactive real estate\u201d 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<\/a> from real estate intelligence firm Property Finder. By Knight Frank\u2019s 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 \u201ccontinues to be the focus of investment.\u201d<\/p>\n

Price points in the capital: <\/strong> Knight Frank\u2019s 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. <\/p>\n

The second home market is also booming: <\/strong> Summer homes \u2014 particularly on the north coast \u2014 have seen \u201csustained strong demand,\u201d 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. <\/p>\n

Part of that demand is driven by tourism from our friends in the Gulf: <\/strong> 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. \u201cIn the past few years, there has been a growing interest from GCC nationals in the real estate market on Egypt\u2019s 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,\u201d the report notes. <\/p>\n

Price points on the coast: <\/strong> North Coast chalet prices are estimated to start at somewhere around USD 950 per sqm, rising to USD 3k per sqm \u201cfor premium units in high-end developments,\u201d 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. <\/p>\n

But there are financial constraints on consumers: <\/strong> \u201cAffordability remains a significant consideration for most buyers due to the country\u2019s hyperinflationary environment,\u201d Knight Frank says. Annual urban inflation came in at 36.5% in July, its highest rate on record. \u201cUnsurprisingly, 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.\u201d<\/p>\n

\u2026and rising costs for developers to grapple with: <\/strong> Developers are taking a more \u201ccautious approach\u201d amid soaring construction and finishing costs, leading them to sell new projects as either semi-finished or \u201cshell and core\u201d 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.<\/p>\n

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Your top infrastructure stories for the week: <\/strong><\/p>\n