Project1_Layout 1 1/16/18 12:40 PM Page 1 AN EXCLUSIVE NEIGHBOURHOOD SODIC introduces new apartments in October Plaza with 2 and 3 bedroom options. Located only a few minutes away from Juhayna Square and SODIC West, this exclusive neighbourhood is characterised by its contemporary architecture in a warm and cozy setting. Offering units ranging from 157 square metres to 320 square metres. For more information, please call the SODIC hotline or visit the Sales Centres: Headquarters:Km. 38 Cairo-Alexandria Desert Road Heliopolis: 46 El Thawra Street, ground floor SODIC @SODICRealEstate @SODICRealEstate www.sodic.com www.mountainviewegypt.com www.mountainviewegypt.com PHASE ONE LAUNCH • Premium location on Road 90, proximate to the New Administrative Capital • Three building types with office areas ranging from 54 sqm to full office building • Underground Parking space that accommodates 4,000 cars PHASE ONE LAUNCH • Premium location on Road 90, proximate to the New Administrative Capital • Three building types with office areas ranging from 54 sqm to full office building • Underground Parking space that accommodates 4,000 cars Real Estate Chap.1 Final OPtion3_Layout 1 1/15/18 5:28 PM Page 12 Industry Insight Riding Out New Cities on the Float the Horizon 14 20 EXPANDING OPPORTUNITIES State of the The Future of Suburbs Commercial 30 property 38 ising prices and interest rates since the free float of the Egyptian pound have pushed the KHALED SEWELAM real estate industry to be creative in funding Director, Research and Publications and marketing projects, yet investors and developers R AMIRA SHEHA are still optimistic about the sector’s prospects. This Research Manager edition of AmCham Egypt’s annual Real Estate Indus FADILA NOURELDIN try Insight tracks how the sector’s players are respond Author and Economic Researcher ing to the economic challenges. First, we look at how KATE DURHAM the stock market and real estate investment funds can Editor and Head of Corporate Publications help the sector stay on track amid high inflation and NESSIM N. HANNA interest rates. The second section offers an overview Senior Art Director of the state’s housing initiatives for low and middle in EMY EMILE come buyers, the national plan for new cities, and the Graphic Designer mortgage market’s potential for growth. Section three AMANY KASSEM revisits the highend real estate market, with insight Advertising & Business Development Director about how developers are coping with higher costs and DINA KARARA changing consumer trends. Finally, we explore new op Circulation Coordinator portunities in the commercial real estate, including re LAMIA SELEIT tail, office and healthcare properties. Advertising and Adtraffic Coordinator HANI ELIAS Production Supervisor ©2018 AmCham Egypt’s Business Studies & Analysis Center. All rights reserved. Unauthorized reproduction, copying, re-mailing, storage or website posting is prohibited. All information in this publication is verified to the best of the author’s and the publisher’s ability. Real Estate Chap.1 Final OPtion3_Layout 1 1/15/18 5:28 PM Page 14 RIDING OUT THE FLOAT RIDING OUT THE FLOAT Real estate is often labeled a ‘safe haven,’ offering investors profitable benefits even during slow market conditions. Property is usually a hedge against inflation, appreciating in value over time, and can potentially provide its investors with additional income through leasing. And relative to other investments, real estate is easier to get into. “When purchasing a property, you have the ability to do so with leverage,” explains Mohamed Abdalla, chairman and CEO of Coldwell Banker Affiliates of Middle East & Greater Africa. It is entirely possible to purchase an EGP 1 million property with only EGP 200,000 cash on hand. “You don’t even have to use your own money. Stocks, on the other hand, require 100 of the investment up front,” he adds. In other words, real estate allows investors to leverage their funds in a way that does not tie them up in one project only. Property investments are also more robust in volatile market condi tions and do not depreciate in value. Stock prices, on the other hand, may depreciate, and returns on time deposits are contingent on economic conditions and maturities. The real estate sector has remained true to type in Egypt, where it has been contributing roughly 815 of Egypt's GDP over nearly two decades, compared to the global av erage of 1520. “The real estate sector accounted for 15 of total investments in the Egyptian economy in 2017 and 10 of GDP. These figures rank Egypt second in the MENA region in terms of real estate investment returns,” former minister of investment and Al Arabia Real Estate Company ARCO Developments chairman Ashraf Salman told the media in December 2017. But the economy has seen a host of changes and challenges since the Egyptian pound was freefloated in November 2016. Since the float, the pound’s value has settled at an average EGP 18 to the dollar, compared to EGP 8.88 before the float. The steep depreciation caused annual inflation to spike, hitting a decade high of 33 in July 2017. The surge in prices took a toll on residential property prices. In early 2017, developers raised prices after construction costs doubled in EGP terms. According to Aqarmap, an online portal for real es tate services, nominal prices of many residential units across Greater Cairo’s districts have increased by more than 40 since the float. 14• Industry Insight - REAL ESTATE A TRADITION OF TRUST w w w.alahly.com Real Estate Chap.1 Final OPtion3_Layout 1 1/15/18 5:28 PM Page 16 RIDING OUT THE FLOAT AVERAGE PRICE INCREASES IN CAIRO’S SUBURBS (EGP PER M2) REHAB & MADINATY NEW CAIRO SHEIKH ZAYED 14,150 39% 44% 12,200 42% 10,625 10,150 8,500 7,475 EL SHOROUK MOKATTAM SIXTH OF OCTOBER & NEW HELIOPOLIS & HADABA WOSTA 37% 10% 36% 7,900 7,000 6,800 6,200 5,825 5,125 Nov. 2016 Nov. 2017 Year-on-year change Source: Aqarmap To curb the growing inflation, the potential for growth not only for local Egyptian property market from Central Bank of Egypt’s Monetary investors but also for Egyptians who Egyptian expats living in the GCC a Policy Committee hiked interest rates live outside of Egypt and are inter strong factor playing here is that their in November, May and July by a total ested in investing. The EGP flotation income is not in the EGP,” Moussa ex of 700 basis points. As of 2017’s end, has contributed to an increase in res plains. “The highest traffic came the overnight deposit and lending idential real estate investments,” says from Egyptian expats living in Saudi rates were 18.75 and 19.75, respec Momtaz Moussa, the former general Arabia followed by Kuwait, the UAE, tively, compared to 11.75 and 12.75, manager of OLX Egypt. In a July 2017 Qatar and Oman.” According to the before the float. report, the global online marketplace Saudi Gazette, the EGP’s float en These challenging changes have af noted that real estate searches by Gulf couraged more Saudi nationals to buy fected Egypt’s property market in Cooperation Council GCC users in properties in Egypt, with the national more positive than negative ways. De particular increased by more than newspaper noting apartments are spite the increase in construction 90 post float. The report compared priced as low as SAR 300,000 USD costs for developers and unit prices foreign traffic on its platforms for 80,000. GCC income levels are the for end consumers, the decreased pur Egyptian real estate during the period highest in the MENA region, which chasing power of the EGP has driven of September 3November 3, 2016, to makes property in Egypt a more an influx of foreign and expat interest the period of November 4, 2016Jan promising investment opportunity in Egyptian properties. “Egypt is a uary 4, 2017. “The results showed a among regional investors and an even massive market with substantial clear increase in demand for the cheaper vacation venue. THE FLOAT: A FRIEND OR FOE? Some experts believe that rising inter each year, and when inflation held Estate Investment Division told local est rates are challenging the tradi steady around 9 11, properties gen news in August 2017, “The real estate tional notion of real estate as a safe erated higher return on investments industry is slowing down after July’s investment, noting that they have im than banking instruments. That has interest rates hike. Real estate pur pacted overall activity in the sector. changed. Mahmoud Badr El Din, chases have also been declining as cus Before the pound’s float, property val chairman of the Federation of Egypt tomers are now parking funds in ues appreciated by an average 25 ian Chambers of Commerce’s Real banks to benefit from the rate hike 16• Industry Insight - REAL ESTATE Real Estate Chap.1 Final OPtion3_Layout 1 1/15/18 5:28 PM Page 17 ARAB SEARCHES FOR EGYPTIAN REAL ESTATE ON OLX 129,563 91% 68,011 109% 66,667 31,949 90% 90,509 47,742 79% 246,846 116% 23,745 137,828 10,986 Traffic (# of web visits): 3 Sept, 2016 to 3 Nov, 2016 4 Nov, 2016 to 4 Jan, 2017 Percentage Change Source: OLX rather than purchasing assets.” In Sep thinks this trend has given investors information provider, the float proved tember, Ali Rabie, chairman of Abraj confidence to list more properties on to be a boon for listed real estate com Misr, told the Financial Times, “High line, which is giving buyers more di panies as more investors parked their interest deposit accounts that offer verse options.