Global Investors Likely to Invest $120 Billion in Egypt’s Real Estate Sector

Egypt’s real estate sector is all set to receive a boost as the Middle East Sovereign Wealth Funds (SWFs) and investors from the US, the UK, South Korea, the UAE, Saudi Arabia, Turkey, and China have evinced significant interest in Egypt, with plans to invest up to $120 billion in the country in the coming years.

With a population of around 110 million, including 20 million residents in Cairo, Egypt is a vibrant metropolis and has approximately 185 million sq m of active real estate, offering immense potential, Knight Frank MENA, global real estate consultancy firm, said in its report entitled “Africa Horizons 2023/24 Report.”

The residential sector continues to be the focus of investment, with 2022 alone recording US$ 20bn of real estate investments in Cairo, $16 billion of which was allocated to the residential sector. The average price of residential properties in Cairo grew by 10% in the same year, highlighting the strong levels of investor demand, the report said.

“Affected by the depreciation of the local currency, real estate investment in Egypt has become one of the few viable options for preserving savings and their value. The recent legislative amendments allowing foreigners to own real estate in Egypt has also increased demand from international buyers and Egyptian expatriates looking for properties at competitive prices,” the report explained.

In New Cairo, apartment sale prices have risen by 24% year-on-year, reaching around $450 per sq m, while villa prices have increased by 8.5% to $690 per sq m. Similarly, in Sheikh Zayed City, apartment prices have surged by 27.8% year-on-year, taking values to almost $430 per sq m, while villa rates have inched up by 2.1% to $625 per sq m, over the same period.

That being said, there is also demand for small townhouses and twin houses, which account for 30% of market demand. In response, developers are increasingly offering smaller units, priced between $81,000-$112,000.

Developers Managing Costs

To reduce risk for developers due to increasing construction and finishing costs, new projects are often semi-finished or shell and core, especially for townhouses and twin houses, in an effort to contain costs and pass on savings to buyers and investors.

Developers are also taking a cautious approach, considering market trends and the depreciating Egyptian pound. As a result, they have reduced payment plans on development finance, which previously stretched up to 14 years, to 7-8 years on average.

Looking ahead, the residential sales market in Egypt is expected to experience slower rates of growth, underpinned by the weakness of the pound and the rising borrowing costs, the report said.

Second Homes Market

The second homes market, particularly summer homes on the North Coast, is expected to experience sustained strong demand in the short to medium term. This is due to the potential for capital appreciation, attractive rental yields in foreign currencies and increased interest from GCC buyers.

“In the past few years, there has been a growing interest from GCC nationals in the real estate market on Egypt’s North Coast. This increased demand can be attributed to a combination of currency depreciation and the pleasant summer climate that the North Coast offers in contrast to the hot weather in GCC between June and September, as well as the numerous options of entertainment and fine dining,” the report said.

Currently, chalet prices on the North Coast range from $950 per sq m rising to $3,000 per sq m for premium units in high-end developments, while villa prices vary between $1,450 per sq m and $3,550 per sq m in similar offerings.

The total value of summer home sales reached $2.1 billion in 2022 and it is expected to a further 30% increase during 2023, the report said.

The report highlighted Egypt’s real estate market, particularly Cairo, as an outstanding prospect for investment. Egypt’s market is viewed as North Africa’s rising star reposing their strong confidence in Egypt’s market growth.

Investments in Cairo

Cairo’s real estate landscape centres on a thriving residential sector as the total real estate investments in Cairo soared to $20 billion in 2022, with $16 billion dedicated to the residential sector, attesting to heightened demand for housing.

During 2021 alone, the UAE invested in 71 projects worth $5.6 billion, the most significant being The Agtech Park in Egypt, where Abu Dhabi Fund for Development (ADFD) supported the establishment of an agricultural technology (agtech) park to enhance Egypt’s agricultural productivity and promote innovation in the sector.

Faisal Durrani, Head of Middle East Research at Knight Frank, said that Egypt has always held a special place in the minds of GCC investors and they were starting to see a demand renaissance of sorts, with GCC buyers increasingly looking at the Egyptian second homes market, particularly on the north coast of the country.

“Clearly the weakness of the Egyptian pound, the relatively affordable home values when compared to major cities in the Gulf and the pleasant summer climate on the Mediterranean coast are adding to the country’s attractiveness. And this renewed demand comes hot on heels of the $78 billion in investments committed by public and private sector entities from the GCC over the last 18-months or so,” Durrani added.