Recession persists in Egyptian real estate market

A view of a Cairo suburb. [Waleed Abu al-Khair / Al-Shorfa]

A view of a Cairo suburb. [Waleed Abu al-Khair / Al-Shorfa]

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Egypt's real estate sector is waiting for an end to the challenges it faces in the wake of the political changes that have swept the country.

Experts say the most significant challenges are the proliferation of unregulated construction, high prices of raw materials, and the fallout from the case brought against iron and steel companies that were owned by businessmen affiliated with the former ruling party.

According to economist and legal adviser Mohamed Ezzat, some traders used the prosecution of businessman Ahmed Ezz -- head of the Ezz Industrial Group companies, the largest steel producer in the Arab world, and former secretary of the National Democratic Party -- to manipulate the availability of construction material on the market, which negatively impacted the real estate sector.

"[The Industrial Group] companies entered an atmosphere of uncertainty affecting their shares in the stock exchange, which dropped dramatically, leading iron and steel traders to hide the materials they had in order to reduce supply to the market and raise prices -- something that indeed happened during the past two months."

Ezzat said he does not expect traders to put the stockpiled materials back in the market for at least three months, which will consequently increase the price of residential units by at least 25%, he said.

Ezzat said he also expects the price of steel to increase from its current 4,800 pounds ($802) per ton to 5,200 pounds ($868) in the coming period.

Farouk Abdel-Latif, a contractor and real estate broker, also attributed the recession in the Egyptian real estate market to traders hoarding steel and cement to push up prices, which in turn has led to higher prices for apartments and residential units -- despite the weak demand.

He said steel and cement companies are producing at only half capacity due to weak demand following the withdrawal of large real estate companies from the Egyptian market.

Abdel-Latif said he expects Turkish steel to flood the Egyptian market despite the high cost of imports because it "would be cheaper than domestic steel prices, which rose dramatically".

The Central Agency for Public Mobilisation and Statistics recently recorded a rise in average prices of major construction materials. Brominated steel, for example, rose 2.6% -- from 4,962 pounds ($828) per ton in July to 5,093 pounds ($850) per ton in August.

Unregulated building witnessing 'significant demand'

Abdel-Latif said another factor hurting what he called the "legitimate" real estate market is the proliferation of unregulated building in the absence of official oversight.

"This unregulated market is seeing significant demand from middle-income and poor families. This phenomenon encompasses all Egyptian provinces, where prices start at 40,000 Egyptian pounds ($6,680) and do not exceed 200,000 pounds ($33,400) at a high standard," Abdel-Latif said.

"The prices of unregulated apartments did not see an increase because of their popularity, so they are not influenced by high prices for steel, which constitutes only 10 percent of the cost of buildings."

In contrast, Mustafa Azzouz, a real estate sales manager, told Al-Shorfa that "getting out of the recession in the real estate market is only a matter of time" and that it would end when the political situation stabilised.

He asserted, however, that the concerns of Gulf investors have had a clear impact on the Egyptian real estate market.

"Even Gulf buyers ordinarily wishing to purchase rather than rent [a place] to spend the holidays are refraining from entering the Egyptian market."

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    معتز

    2012-7-21

    For the first time, there was an elected President and therefore, one of the most important priorities of President Mohamed Morsy is the full attention and inclusion of the tourism sector in Egypt because of its importance. Egypt's tourism has rebounded again significantly and noticeably more than before the Egyptian revolution as the events of attention to our country, Egypt started. The indicators of success for President Mohamed Morsy of Egypt appeared in the tourism sector as the safety and comfort for tourism have been provided and accommodation in hotels and motels that are very suitable for tourism were also provided with cheap prices as well as the provision of modern transportation to serve them when travelling between the various archeological places, like for example Luxor and Aswan.

  • رامي يوسف

    2011-11-13

    Actually, Egypt is witnessing a crisis in the real estate market, because of the situation and the decline of the economic sector, which is due to the unstable political situation. Moreover, they have spread many rumors and frightened many citizens in order to destabilize the situation more, and other communities will take power. This behavior will make us return to the era of former President Hosni Mubarak. For this reason, it is very important to control and improve all the situations, in order not to witness successive crises. Politicians must put an end to all the events taking place in Egypt, to save the country from more deterioration. As for real estate in Egypt, it is witnessing a noticeable and significant decline. The crisis is even increasing because of the deteriorating political and economic situation. Officials are busy and they are not interested in all the necessary measures needed by the country. All people are interested in politics and they forget about the economic situation, which has declined and deteriorated. For this reason, officials should take quick and urgent measures in order to prevent unknown communities from exploiting real estate. They should implement rigorous and strict control in order to prevent deterioration; otherwise all people will regret their neglect of the situation.

  • ابراهيم بركات

    2011-11-12

    I think that the political crisis in Egypt has affected the real estate market and caused stagnancy since the turmoil witnessed in the country. I personally believe that this is the main reason behind the stagnancy of real estate in Egypt. Moreover, the Egyptian market is suffering greatly from the halting of imports of materials needed for reconstruction, such as reinforced concrete, iron, and cement. In addition, I have noticed that many investors, and especially the Gulf ones, have stopped their investments in the domain of reconstruction projects. This has significantly affected the sector of real estate in Egypt. Many remnants of the former regime used to impose their control on the import and export operations, together with the building of residential units in Egypt. Today, many of them are imprisoned and their companies have been shut down. Of course, this has led to the cancellation of many transactions that used to provide reconstruction materials, whether produced in Egypt or imported from abroad. These factors are considered among the major reasons behind the stagnancy of the real estate sector in Egypt. Many persons have taken advantage of the absence of legal controls after the events witnessed in Egypt, and have built random houses. Many families who are looking for cheap housing have opted for this choice, because of the low costs when compared to the building carried out by companies and contractors. Today, the real estate market is facing many problems that have caused its decline, because of the absence of reconstruction materials in the Egyptian market and the significant decline of reconstruction activity, which is strongly needed in the country. Egypt is suffering from serious housing problems because of the increasing population rate. The absence of political stability will lead to a continuous stagnancy in real estate until things get back to normal again and the importation of reconstruction materials resumes.

  • شوقي انور

    2011-11-10

    There is a terrifying and disappointing stagnation that worries us a great deal in the real estate market in Egypt. This stagnation appeared on the scene and had a direct influence, from the start of the revolution of the twenty-fifth of January until now. The real estate market in Egypt is facing a great decline and is suffering a great deal. This situation will never end and will remain the same until there is political stability in the country, which in turn will lead to a flourishing economy, God wiling. Citizens and investors no longer want to put their money into the real estate market because of the unstable political situation since the former regime was toppled, because everyone is in a state of anticipation that controls the movement of buying and selling, especially since the real estate market is controlled by the rich. They are not forced to sell now, and they could wait for a long time to achieve the profits they want because of this current stagnation in the market. I believe that the government should now move and build projects to activate the real estate market in the country, and should allocate land for such projects, even if they only have small profits. This will play a role for sure. The country should also provide all possible cooperation to attract Arab investors to spur the real estate market, and it should conduct elections quickly to lead the country out of this state.

  • توفيق بدر

    2011-11-9

    The real estate market has deteriorated in Egypt, especially after the revolution that stopped many operations. Egypt is now suffering from a very big crisis, and this situation cannot stay like this for long. The situation has to be more serious in Egypt. This stagnation is a proof of weakness and of the increase in prices. Egyptians will not be able to bring conditions back to the way they have been. Things are already more complicated. This crisis should be solved with all the possible ways. The increase in real estate prices in Egypt is the result of the acts of sabotage that took place during the days of the revolution. This situation needs a lot of money so that things could go back to normal. I pray to God for the utmost wellness and success, and may they always be the best in the future, God willing. May things go back to normal and to better than they used to be, and may the real estate, building and reconstruction and security crises be resolved soon.