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Real estate market in initial recovery

Successful presidential elections have reinvigorated the real estate market but it may be temporary

By Hamada Ismail

Real estate market in initial recovery (Photo by AFP)

The real estate market has begun showing initial signs of improvement after the conclusion of the presidential elections, with real estate companies recording higher sales and buyers returning to the market.

Companies had hoped for the return of confidence to the market and the beginning of its recovery after a period of stagnation that lasted 18 months.

Officials in real estate companies attributed the movement to the relative stability that has returned to the market after the presidential elections. Stability has, in turn, brought greater confidence to the market as buyers and sellers have more information on prices.

Companies predicted that prices will continue to rise, especially due to deferred demand, and that buying will increase as a form of investment.

The demand for real estate is primarily affecting small and medium sized housing units, indicating a demand for residential use, as opposed to using them for commercial or investment purposes.

Officials added that demand for coastal real estate is similarly connected to demand for residential use, and that demand for luxury units has remained stable.

Real estate brokers have said that units for immediate delivery represented the focal point of buyers’ demand due to fears that companies would otherwise not fulfil their obligations within set time limits.

The revolution and its aftermath disrupted real estate companies’ abilities to deliver planned projects because of the breakdown in security.

Companies were also concerned that the increased activity in the real estate market would be temporary, and that fears would return with ongoing economic and political uncertainty.

In addition to Ramadan approaching, which is a month that usually sees a marked decrease in market activity.

Ikrami Al-Sabbagh, Chairman of the Board of Directors with the Honest Real Estate Company, said that sales in the market were stable last year, but that they experienced a noticeable rise in the last several days.

He attributed the movement to the announcement of the presidential election results, which was reflected in renewed demand.

The increased demand, he noted, is a powerful indicator that the real estate sector is on its way to recovery.

After the new President took office and began making preparations to appoint a new government, investors felt a return of political and economic stability to the country, which positively affected their activity in the real estate market.

El-Sabbagh said that previously, potential real estate investors abstained from entering the market because of fears of instability. This state of anticipation lasted for the previous 18 months.

It is important to broadcast reassuring messages to investors, he noted, especially after a period in which the government showed its willingness to withdraw lands from investors and cancel contracts.

In addition, El-Sabbagh called on real estate developers to remain committed to previously determined delivery dates for real estate projects in order to bring more stability to the market and attract more investors.

Mostafa Shamandi, director of marketing for Al-Sedra, said that developers are currently concentrating on medium sized projects, especially those that include small units.

He said the demand for small and medium sized units indicates that buyers are interested in residing in these units, not just re-sale. He added that buying for re-sale declined significantly in the previous period due to fears of continually falling prices.

Housing for immediate delivery or projects that are near completion are currently in high demand. Shamandi noted that a lack of confidence still exists in the market, as several companies failed to fulfil their contractual obligations.

As such, the previous period witnessed increasing rates of lawsuits brought against real estate developers.

He noted that clients became more interested in flexible payment options, the value of the down payment, the amount of each instalment and the timeframe for settlement.

Therefore, real estate developers offered unprecedented concessions to buyers that affected all types of projects.

Shemandi predicted that demand would continue to rise gradually until the end of the current year and fully recover in the next real estate season, as long as there is political and economic stability.

Mohamed El-Mahdy, Chairman of the Board of Directors for Micro Castle Co., said that demand for housing units along the north coast has markedly risen in the last several days, particularly since the market for coastal
units usually picks up during the summer season.

He added that buying increased when clients became more confident that prices would not continue to fall.

He noted that investors are now confident that prices will continue to rise and that the current period favours buying.

El-Mahdy urged companies to seize the current opportunity by offering more incentives to potential buyers and to refrain from quickly raising prices or cancelling promotional offers.

However, he expressed concern that the current increase in market activity is very likely to be temporary and that soon it would recede, especially with the approach of Ramadan.

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