Steady Capital Growth

The housing market in Egypt is very much emerging. As a result of rising demand and various government reforms, undertaken by Prime Minister Ahmed Nazif, the property market is buoyant.

There are substantial differences between the prices for domestic and holiday home properties in Egypt. In fact, agents are reporting capital growth of between 15% and 30% per annum for second home products; a trend expected to continue given the substantial demand from international property purchasers and wealthy Egyptians.

Entry levels to the Egyptian property market remain relatively low. Like everywhere, location and build quality vary and some remarkably inexpensive opportunities have been available. El Gouna offers some of the more expensive real estate, justified by its position as the highest quality resort town on the Red Sea Coast and in Egypt as a whole. Specifically, in El Gouna, house prices have witnessed a healthy growth over the past nine years with a compound annual growth rate of over 20% since 1999.

Strong Demand
An increasing number of high profile real estate projects are underway in Egypt and along the Red Sea Coast, with large international development companies now entering the market, such as Emaar and DAMAC. Emaar are developing mixed use projects in Cairo and on the Mediterranean Coast, including Uptown Cairo, Marassi, Cairo Gate and New Cairo City.
The increased number of offerings available in Egypt are being closely matched by demand from international and domestic property purchasers. The ‘Top of the Props’ report in April 2008 by TheMoveChannel has listed Egypt as the 8th most enquired about destination for property investment. To cater for the population growth in Egypt, an estimated 400,000 units are required annually. The introduction of mortgage finance and income tax reforms have liberated domestic disposable income. As a result more Egyptian nationals can afford second and holiday homes.

 

Finance Availability

Since the Real Estate Mortgage Law was enacted in 2001, allowing bank and non-bank institutions to offer mortgage finance, the mortgage market for domestic property purchasers has been gradually evolving. In 2004, new laws enabled lenders to issue mortgage backed securities.

Mortgage finance is now available in Egypt for completed properties. It is likely that further development of mortgage finance and credit availability generally will give even greater momentum to property prices increases.

Historically, developers have provided low cost housing because finance has not been available. This trend is starting to turn and luxury and superior quality developments like Ancient Sands Golf Resort are becoming available.

Rental Demand

Under the Ministry of Economic Development Five- Year-Plan, the Ministry of Tourism aims to double the number of visitors to Egypt by 2012. This will result in an increase in rental demand.

With an average spend per night of US$85 across Egypt in 2006, there are strong rental returns to be made. In El Gouna, an average occupancy rate of 83% was achieved in 2007. At Ancient Sands Resort we anticipate that, before costs and management share, a gross rental return of circa 14% per annum is achievable. The government reforms of 2005 that reduced income tax by 50% have made the rental market even more appealing.