HOUSING DEMAND STUDY for the Arab Republic of Egypt
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HOUSING DEMAND STUDY For The Arab Republic of Egypt June 22, 2006 This publication was produced for review by the United States Agency for International Development. It was prepared by Suzette Aziz, Hazem Kamal, Maha Samy Kamel, Kamal Selim, Hany Serageldin, and David Sims. HOUSING DEMAND STUDY FOR THE ARAB REPUBLIC OF EGYPT TECHNICAL ASSISTANCE FOR POLICY REFORM II CONTRACT NUMBER: 263-C-00-05-00063-00 BEARINGPOINT, INC. USAID/EGYPT POLICY AND PRIVATE SECTOR OFFICE DATE: JUNE 22 2006 AUTHOR: SUZETTE AZIZ, HAZEM KAMAL, MAHA SAMY KAMEL, KAMAL SELIM, HANY SERAGELDIN, DAVID SIMS. SO 16 < OR ACTIVITY TITLE AND ASSOCIATED NUMBER> DISCLAIMER: The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. TECHNICAL ASSISTANCE FOR POLICY REFORM II i CONTENTS ACRONYMS & DEFINITIONS...................................................................................................................... 1 EXECUTIVE SUMMARY: KEY FINDINGS AND RECOMMENDATIONS................................................... 2 INTRODUCTION........................................................................................................................................... 2 CHAPTER 1: MACROECONOMIC LINKAGES OF THE HOUSING SECTOR ........................................ 13 1.1 Introduction ....................................................................................................................... 13 1.2 Importance of Housing Sector Production in GDP ........................................................... 14 1.3 Construction & Building and Real Estate Activities in GDP.............................................. 15 1.4 Investing in Construction and Real Estate Activities on the National Level...................... 17 1.5 Contributions of Investments to the Housing Stock .......................................................... 19 1.6 The Role of the Informal Sector ........................................................................................ 21 1.7 System of Credit Allocation to the Housing Sector ........................................................... 22 1.8 Lending Volumes and Mechanisms.................................................................................. 24 1.9 Lending Interest Rates and Inflation ................................................................................. 26 1.10 Reforming Housing Mortgage Finance ............................................................................. 27 1.11 Conclusions....................................................................................................................... 28 1.12 Recommendations ............................................................................................................ 29 CHAPTER 2: QUANTITATIVE AND QUALITATIVE OVERVIEW OF HOUSING SUPPLY AND THE HOUSING MARKET........................................................................................................................... 31 2.1 Introduction and Methodology........................................................................................... 31 2.2 A Context for Examining the Housing Supply................................................................... 31 2.2.1 A Brief History of Egypt’s Housing Policies ........................................................... 31 2.2.2 Economic Trends That Relate to the Housing Supply .......................................... 32 2.2.2.1 Increase in Population and Urbanization ................................................ 32 2.2.2.2 Patterns of Industrialization, Employment and Income .......................... 33 2.2.2.3 Urban Problems in the Greater Cairo Region......................................... 34 2.2.2.4 Factors Influencing Housing Need and Demand.................................... 35 2.2.2.5 Housing Prices and Rent ........................................................................ 35 2.3 Overview of Housing Stock and Housing Conditions ....................................................... 36 2.3.1 Housing Stock In Urban Areas............................................................................. 36 2.3.2 Informal Housing Stock........................................................................................ 37 2.3.3 Surplus Units........................................................................................................ 38 2.3.4 Housing Provision by the Government ................................................................ 39 2.3.5 Types of Tenure................................................................................................... 40 2.3.6 Occupation Densities and Overcrowding............................................................. 40 2.3.7 Access to Main Utilities ........................................................................................ 41 2.3.8 Age of Dwellings .................................................................................................. 42 2.3.9 Maintenance Status ............................................................................................. 42 2.4 Market Overview and the Supply of Financing ................................................................. 42 2.4.1 How the Housing Supply is Influenced by Market Conditions ............................. 43 2.4.2 Current Financing Options ................................................................................... 43 2.4.3 Current Acquisition Options ................................................................................. 44 2.4.4 Arrangements Adopted Between Developer and Customer................................ 45 TECHNICAL ASSISTANCE FOR POLICY REFORM II ii 2.5 Conclusions....................................................................................................................... 45 2.6 Recommendations ............................................................................................................ 46 CHAPTER 3: CURRENT AND FORECAST HOUSING DEMAND BY INCOME SEGMENT................... 48 3.1 Introduction ....................................................................................................................... 48 3.2 Methodology...................................................................................................................... 49 3.2.1 Using the “Structure Plan Forecasting” Approach ............................................... 50 3.2.2 Local Housing Needs Assessment for Cairo ....................................................... 50 3.3 Forecast of Future Needs on the National Level .............................................................. 51 3.3.1 Urban Population Projections and Expected Number of Households in 2017 ..................................................................................................................... 51 3.3.2 Existing Urban Housing Stock in 2006 ................................................................ 53 3.3.3 Calculation of Housing Needs Through 2017 ...................................................... 55 3.3.4 Breakdown of New Needs by Income Bracket, 1999-2000 ................................. 56 3.4 Local Housing Needs Assessment for Greater Cairo ....................................................... 60 3.4.1 Characteristics of Survey Respondents............................................................... 60 3.4.2 Characteristics of the Housing Currently Occupied by Survey Respondents........................................................................................................ 61 3.4.3 Reasons That Respondents Have a Demand for New Housing Units ................ 62 3.4.4 Characteristics of the Housing Demanded by Survey Respondents................... 63 3.4.5 Characteristics of the Financial Arrangements Acceptable to Survey Respondents........................................................................................................ 63 3.5 Choices and Residential Strategies Currently Available to Young Households............... 63 3.5.1 The Private Sector ............................................................................................... 63 3.5.2 The Public Sector................................................................................................. 64 3.6 Further Demand-Related Considerations For Egyptian Housing Policy........................... 65 3.7 Conclusions....................................................................................................................... 67 3.8 Recommendations ............................................................................................................ 68 CHAPTER 4: AFFORDABILITY ANALYSIS ............................................................................................. 69 4.1 Introduction ....................................................................................................................... 69 4.1.1 Preface................................................................................................................. 69 4.1.2 Objectives ............................................................................................................ 70 4.1.3 Methodology......................................................................................................... 70 4.2 Prices of Housing Units..................................................................................................... 73 4.2.1 Current Housing Prices.......................................................................................