In an interview with Daily News Egypt, the Middle East regional director of Colliers International, Ian Albert, said that middle-market investors are facing financial issues which the government needs to address.
Since a year ago, a lot of changes have been happened in the real estate market. How do you view them?
The market is very solid. However, the currency flotation came in, the market spiked, especially the residential market, and also, there was significant positive change in the retail, lands, and office markets due to the devaluation of the Egyptian pound, which was better overall. In addition, the launching of the New Administrative Capital has a massive impact on Cairo, not only in terms of the development itself, but also what will follow it.
After cutting interest rates by 1% and the expiry of high-interest rate certificates, how do you see the market?
Interest rate statistics imply that there many are interested in the real estate market. However, inflation has a great impact on decreasing liquidity in the market. I think the parallel market was impacted by the devaluation, the development market was affected by the high interest rates, and there is a vast number of investors occupying both markets.
When inflation began to come down, that was the start of stabilisation for the parallel market and the decrease of interest rates is good for the development market.
Moreover, the type of supply which is coming from Cairo or other areas will be delivered, for example, after four, five, or seven years. The question here is where the funds will come from to execute this supply. Therefore, the government needs to address these finance issues, particularity for the middle-market sector.
I know that there are some changes in the laws, but mortgage finance should play a deep role in the development.
Do you believe that the Egyptian real estate market is facing a financial gap?
There is a gap. The country also has to address cash flow issues to allow developers to advance their businesses, as mid-size developers are facing cash flow issues.
The state has achieved great success in providing middle-income housing, like Dar Misr and Beit AlWatan projects. Do you think the state competes with developers in this area?
Absolutely, the government has achieved a boom in providing this kind of housing. The developers complain because they want to make money, but the government’s responsibility is to provide housing and push this market segment forward.
So that the developers may complain about the government is taking the market away from them. However, the developers have lots of lands and they may offer them for retail, clubs, and also residential use, and can do so alongside the government. It is a short-term effect but has a long-term impact.
Moreover, developers have to be distinctive in providing high quality products, but the government provides basic services and is not providing luxury housing.
What is your expectation for prices in the current year?
Prices are going to stabilise, and I expect that prices in 2018-2019 will increase by 10%. Besides, I think affordability is also of primary concern, as consumers are becoming more price sensitive and competition is becoming intense.
Which sectors are facing a gap in meeting demand for residential, retail, administrative, and offices?
The Egyptian population drives everything and has needs for all these sectors. I think retail activities are in most demand, specifically community retail, as there are a lot of places in entertainment retail and destination retail and new formats and new styles are needed for new generations. Nevertheless, the state is in need for educational activities and hospitals.
A bright star in Egypt’s real estate sector is office activity. Over the past five years, 90th Street in New Cairo has been rapidly establishing itself as a major commercial hub or strip in the city.
Notwithstanding, by the end of 2018, the residential market will be undersupplied by 320,000 units, a gap that will increase to 580,000 units by 2022.
This translates into approximately 52,000 required units per annum, while supply is expected to grow by 20,000 units per annum.
What is your opinion and expectation for New Alamein city, which is being developed by the state?
The development of that area is important for the development process in general, as the country needs to push and grow the middle class forward in terms of education and job opportunities. The country needs to diversify the market with blue-collar and white-collar employees, which may be achieved through providing high quality educational projects whether in New Alamein or in other areas.
How do you see the state and developers’ strategy to export real estate?
Exporting real estate is mainly aimed at Egyptian expatriates, as Egyptians who do not live in Egypt want to buy property in their country. Nevertheless, foreigners who would like to buy property in Egypt are not very many.
How do foreigners see buying Egyptian real estate property?
They do not know that there are properties to buy. Egypt, for some foreigners, is only the pyramids. Thus, it is difficult for them to invest in a market they do not really understand.
It is going to take few years for non-Arabs to invest in the real estate market in Egypt. Hence, Egypt does not have a meaningful share in exporting real estate abroad until now.
How do you see Egypt’s second homes market?
Definitely, the second homes market is seeing more growth and is developing, especially after the currency flotation, as there is much more interest for this market in the country and for some foreigners who want to buy property overseas because Egyptian property is cheap.
Which are the most promising areas in the second homes market?
Sharm El-Sheikh is still struggling to brand itself, meanwhile, the North Coast is doing good and Ain Sokhna is also popular.
How do you view the Cityscape Conference that will be held by the end of the current month?
I think it will be an interesting Cityscape this year compared to last year due to the currency fluctuations that happened in the past year. However, this year, we have worries about too much supply; where will the buyers come from? I think such conversations need to be discussed.