CAIRO: The mood among the development moguls and mortgage experts assembled for “Real Estate in Egypt session Tuesday carried little of the cheeriness expressed by Euromoney conference panelists in the financial and investment sectors.
While hopes bobbed ever higher with each repetition of Egypt’s 4.7 percent increase in GDP, as well as great expectations for its continued growth, the real estate sector expresses caution, despite Egypt’s oft-touted imperviousness to the woes plaguing their international colleagues.
Real estate development and sales have been crucial in maintaining Egypt’s positive growth, and the coming year looks grim.
The market “is at a standstill, Khaled Rasekh, the CEO and president of ERA Middle East and North Africa, said.
“All records show that 2010 will be worse than 2009, he continued gravely.
The high income housing market is glutted, and although low income housing is desperately needed, the sector will not be able to generate the same quantities of capital that have fertilized Egypt’s economic growth for the past several years.
Mortgage consultant Ahmed Haggag tried to inject a ray of hope that real estate in Egypt is going “back to the basics.
He also cited the newly created Egyptian Financial Services Authority (EFS) as a catalyst in spurring growth, and expressed his wish that it would also become a much-needed vehicle for consolidating information about the real estate sector. However, he expressed concern at the narrow margin for mortgage finance in Egypt and the burden that mortgage financiers carry.
Khaled Sedky, chief portfolio officer for Palm Hills Development (PHD), emphasized the crucial distinction between the Class A and A+ (high income) housing market, and the market for Class B and C (middle and low income).
Although the demand from Class B and C can act as a buffer when demand falls in Class A, he gave the ominous figure that “the Class A market will reach satisfaction in 2010.
He turned to more diversified, non-residential projects such as office parks as an alternative, which caused Rasekh to adopt a slightly brighter tone, retracting his earlier remark about 2010 not being a great year, because “investors in services will do well.
Asked about Egypt’s newly introduced property tax, Omar Elhitamy, managing director of Orascom Housing Communities, joked that he was exempt from answering; while other panel members appeared reluctant to answer. Finally, however, they said that real estate should not experience adverse effects from taxation.
The discussion turned to complaints about the amount of speculation that has followed the (now fading) boom in Egyptian real estate; short-term investors from the Class A market that buy a piece of property in order to profit by selling it when prices increase. Such activity spurred Egypt’s housing bubble but has left prices artificially inflated – and now property holders refuse to sell for less.
“My father used to tell me, ‘It’s a piece of property: it doesn’t eat, it doesn’t drink, so keep it next to you until you get its price.’ This is the prevailing mentality, said Rasekh.
Elhitamy agreed, conjuring images of Orascom developments only half-filled with residents and newer investors demanding the return of their down payment on unfinished projects.
Perhaps to lift the mood, or perhaps to reassure any potential investors in the room, Haggag asserted that Egypt remained an attractive location for investment, and with its relatively low interest rates, for borrowing money as well.