Egypt has recently experienced an exponential increase in real estate prices and volume of sales backed by governmental reforms, the devaluation of the Egyptian pound in early 2003, and the elimination of restrictions for foreign ownership of real estate. Prime Research expects that the real estate sector will continue in its current upward trend due to Gulf investment.
The government's continuous reform efforts should bring about a major shift in the real estate sector. However, the lack of an effective financing system limits overall saving rates, since housing accounts for 50% to 70% of household expenses. Even so, low-income households cannot afford a mortgage financing rate of 14%, the projected rate under a reformed mortgage financing system.
Reforming Egypt’s property registration process is a critical step in launching a mortgage financing system. Nearly 85% of Egypt’s properties are currently unregistered. Property registration has historically been expensive, at a cost of 12% of total property value in 2001, and time consuming, typically taking 6 to 8 months to complete.
Meanwhile, the government has been working to establish new cities in desert areas so as to make use of abandoned areas and to redistribute the population away from the crowded Nile valley and throughout the whole country. In order to achieve these goals, the government has started a rural development strategy (with planning extending to 2017) for the establishment of 59 new urban cities.
Thus, huge foreign investment is expected to pour into the real estate sector from Arab and gULF investors who see Egypt’s real estate market as a risk-free investment; in fact, they expect a 100% return on their investment.
Recently elevated oil prices have generated huge amounts of capital in the Arab world. Arab investors are expected invest 40% of this money in the Egyptian real estate sector. Over the past three years, Arab investment has poured into the gigantic City Stars project located to the east of Cairo. The total initial investment cost for the City Stars project amounted to over LE5 billion. City Stars commenced operations in 2005.
