{"id":614352,"date":"2024-01-31T00:00:00","date_gmt":"2024-01-31T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/the-real-estate-sectors-2023-recap-what-to-expect-in-2024\/"},"modified":"2024-01-31T00:00:00","modified_gmt":"2024-01-31T00:00:00","slug":"the-real-estate-sectors-2023-recap-what-to-expect-in-2024","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/the-real-estate-sectors-2023-recap-what-to-expect-in-2024\/","title":{"rendered":"The real estate sector\u2019s 2023 recap + what to expect in 2024"},"content":{"rendered":"

Real estate sector shows resilience in the face of macroeconomic challenges:<\/strong>The real estate sector managed to maintain positive momentum and show resilience in 2023 and heading into the following year, despite the persistent challenges coming from high inflation and interest rates, FX shortages, and import restrictions, global real estate consulting firm JLL said in its yearly review (pdf)<\/a> for 2023.The report took a look at the residential, hospitality, office, and retail markets.<\/p>\n

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RESIDENTIAL-<\/p>\n

2023 was a good year for the residential sector: <\/strong>The residential sector maintained high demand throughout 2023, despite units getting pricier on the back of inflation driving construction cost up. Buyers looked at residential units as means to hedge against a weakening EGP.<\/p>\n

Further increase in prices is expected: <\/strong>Real estate prices are expected to see a significant increase \u2014 that could go up to 50% \u2014 in the near future, mostly due to the rapid increase in input costs, New Cairo Developers Association Head Mohamed El Bostany tells us.<\/p>\n

New strategy?<\/strong> Some landlords have scaled back their payment plans to 5-8 years from up to 15 years, a move which is expected to fast track recovery in the sector as developers \u201cexplore cost-saving measures such as buying construction materials in bulk and offering advanced payments to contractors,\u201d JLL said in the report.<\/p>\n

In numbers: <\/strong>Cairo\u2019s residential sector added some 23k units to the fray in 2023, up from 18k in 2022, increasing the total stock to around 268k units. However, that turned out to be way below the 35k JLL had projected in its 2022 market report (pdf)<\/a>. Another 33k units are expected to be delivered in 2024.<\/p>\n

\u201cIt\u2019s a very speculative market at the moment,\u201d<\/strong> JLL\u2019s Egypt Country Head Ayman Sami told Enterprise. Most of the units are being priced with the anticipated devaluation factored in as developers seek to \u201chedge against any future volatility in the exchange rate \u2026which creates big cost increments.\u201d On the other hand, input costs are increasing at a rate where they sometimes eat up at developers\u2019 profit margins, so the higher sale prices aim to make up for some of the losses, Sami added, explaining that the contractor too would be looking to hedge gainst EGP volatility.<\/p>\n

ICYMI- <\/strong>The government in July approved a decision to remove the cap<\/a> on the number of properties foreigners can own provided that they pay for the properties in hard currency. The government is also working<\/a> on a real estate-for-FX scheme that would grant incentives for Egyptian expats and foreigners in Egypt who are willing to pay in foreign currency to purchase properties in Egypt from private-sector developers.<\/p>\n

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HOSPITALITY-<\/p>\n

More hotel rooms are being added to accommodate increase in arrivals: <\/strong>Around 250 rooms were added to Cairo\u2019s hotel stock \u2014 well below the 900 projected by JLL last year \u2014 bringing the total hotel inventory to roughly 28k rooms. Over 1.5k rooms are expected to be delivered in 2024, mainly coming from 4- and 5-star hotels, according to the report.<\/p>\n

Remember: <\/strong>Egypt welcomed a record 14.9 mn<\/a> tourists in 2023, increasing the appetite of global hotel operators to expand their operations in Cairo, the report noted.<\/p>\n

Tourism plays a big part in attracting foreign buyers to the real estate market<\/strong>, Sami tells us.Some real estate developers have already shifted their strategies to attract foreign buyers \u2014 especially from the GCC countries \u2014 with the North Coast becoming an increasingly attractive destination, Sami added.<\/p>\n

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OFFICE + RETAIL-<\/p>\n

Office spaces were mainly targeted by international companies in Egypt <\/strong>and those looking to upgrade their office spaces, especially in the New Cairo area.The year saw the delivery of about 136k sqm of office space, which is below the 400k sqm previously projected. Almost 570k sqm of office space are scheduled for delivery in 2024, with offices in the new capital contributing the lion\u2019s share, closely followed by New Cairo.<\/p>\n

The retail sector had a rough 2023: <\/strong>A mere 83k sqm of gross leasable area (GLA) were added to Cairo\u2019s retail market in 2023, compared to the 380k sqm that were expected to be delivered. Soaring inflation, the EGP\u2019s devaluation, and the shrinking consumer purchasing power have weighed on the sector, the impact of which is expected to carry over into 2024. Some 447k sqm of retail space are scheduled for completion in 2024, the report estimates.<\/p>\n

\u201cRetai<\/strong>l is still not a bad asset class, it\u2019s just that things have changed<\/strong> \u2014 mainly for the international brands, in terms of affordability and import restrictions,\u201d Sami explained. \u201cE-commerce has [also] affected the amount of space that is required by retailers,\u201d coupled with all the challenges we\u2019ve had over the last few years, and then you start to see the reasons for the shift in the market, he added.<\/p>\n

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