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Investment in the real estate sector in Egypt is taken as a safe haven for investors with the forever increasing demand for commercial and residential real estate projects due to the gap of supply for a growing population of more than 100 million people. The forecasted total household spending in Egypt to reach USD209bn in 2024, up from USD145bn in 2020. With the current resilient positive economic growth rate of 3.6% in fiscal year 2020/21 despite the pandemic, all with the government's plans and development efforts to leverage the real estate market and infrastructure in new cities that made Egypt one of the booming and outperforming real estate markets in the region

Egypt Real Estate Sector Performance

Even before the revolution of 2011 the real estate sector was one of the hottest investment areas in the country. According to the Ministry of Planning and International Cooperation, property growth rates topped 15% in the lead up to the revolution.

Unsurprisingly, as with all facets of the economy, the immediate aftermath of this event constricted investment flowing into the sector. Total investments in real estate fell for two consecutive years running following the revolution, according to a report by Madinet Nasr Housing. Between 2013 and 2014, investments fell by 7% to LE29.6bn ($4bn) as investors remained out of the market.

However, this trend was short lived, and the market has generally remained robust and positive despite political and economic uncertainty. Indeed, in many ways, the current situation has benefitted the sector. A negative real interest rate, coupled with the devaluation of the Egyptian pound, has seen domestic investors push their cash into real estate as a safe investment.

This trend has also been stimulated by the capital controls introduced by the Central Bank of Egypt in February 2011. According to the media, under the regulation, the bank set a limit of $100,000 in foreign transfers for individuals with no time limit. While this was loosened at the beginning of 2014 to allow one $100,000 transfer per individual per year, it has still ensured that there remains a strong domestic funding base, much of which is turned towards property.

The focus of investors on real estate is clear from the sector’s performance in 2015. In the first quarter of 2015 alone, property investments in Egypt increased by 30%. Consequently, residential sales prices have increased by as much as 20% depending on location, while land prices have increased by 35%, according to Ibrahim Al Shawarby, a member of the International Real Estate Federation, in conversation with the media.

In the second quarter of the year, residential sales in Cairo continued to perform strongly. In its “Cairo Real Estate Market Overview” for the quarter, Jones Lang LaSalle reported an annual residential sales price increase of 8% for apartments in the suburb of New Cairo and 26% and 23% for apartments and villas, respectively, in 6th of October City, although sales prices for villas in New Cairo in the same period dropped by 7%.

In many ways, this is simply the continuation of a strong performance by the formal real estate sector over the last 18 months. In 2014, for example, the six largest listed developers increased their sales volumes in terms of units by 20%, shifting almost 13,000 units. Furthermore, the value of off-plan sales for these companies increased by 40% to LE25.9bn ($3.5bn) in the same period. These figures are particularly notable given the macroeconomic headwinds of the last four years: real GDP growth has remained persistently sub-par, failing to exceed 2.2% in the years since the revolution, according to the IMF. Furthermore, unemployment during this period moved into double digits, hitting 13% in 2013, a figure that has remained the same in 2015. Meanwhile, national savings decreased by 27.1% between the financial year 2009/10 and 2012/13, according to HC Securities and Investment (HC).