Research centres expect inflationary wave to hit real estate in 2022

Daily News Egypt
5 Min Read

The Russian-Ukrainian war and its accompanying inflation has led to a rise in the cost of building materials, with the annual inflation rate in Egypt recording 10% for February 2022, compared to 4.9% a year earlier.

Al-Ahly Pharos Research expected an increase in building materials’ costs by 15% during 2022, pointing out that a previous research had determined the increase at about 5%.

The centre also predicted that developers will increase real estate selling prices by 10% during 2022 to accommodate the increases that will occur in the costs of building materials.

Pharos, however, expected that sales would grow by about 10% during 2022, in addition to an increase in sales of ready-to-move units, especially in light of the middle-income mortgage programme, which now covers units with prices up to EGP 2.5m.

It explained that expectations indicate that changes to instalment schedules will not be made in 2022 by development companies, expecting that average instalment schedules will continue for eight years starting 2022, and in the event of a change, it will be minor, especially for ready units.

Pharos also believes that 2022 will witness a restructuring of the real estate sector, especially after the legislation obligating real estate developers to pay about 30% of the value of the project before its launch.

It expected that the rate of deliveries would increase to allow for more securitisation operations, as only the receivables related to the units that were delivered could be securitised.

It stressed that 2022 is the year of regulation of the real estate market, pointing out that there is an ongoing dialogue between major developers and the Ministry of Housing to search for the most efficient and effective way to regulate the sector. It explained that these transformations pave the way for a more regulated real estate finance market.

Aly Adel, a real estate sector analyst at Beltone Securities, expected an increase in the prices of real estate units ranging between 20-30% during the current year, especially after the rise in the prices of raw materials globally due to the developments of the Russian-Ukrainian war.

Adel added that it is possible that the inflationary wave in real estate prices will extend until the beginning of next year after the expected increases ranged between 10-20% during the current year due to expected inflation.

He explained that most developers have a stock of building materials up to about six months, and that the increases will start at the beginning of the third quarter (3Q) of this year.

Daily News Egypt conducted a survey of the top 10 real estate companies listed on the Egyptian Exchange (EGX) in terms of profitability, contractual sales, and revenues.

Emaar Misr topped the list with profits of EGP 4.12bn, a market value of EGP 11.87bn, and achieved contractual sales of EGP 23.2bn. Talaat Mostafa Group ranked second with profits of EGP 1.78bn. The group reached a value of EGP 17.97bn and its contractual sales amounted to EGP 32.4bn; followed by Orascom Development Egypt in third place, achieving EGP 1.12bn in realised profits, while the market value of the group reached EGP 4.66bn, and its contractual sales scored EGP 9.2bn in the first nine months of 2021.

SODIC came in fourth place with EGP 865.1m in realised profits, and its market value reached EGP 4.67bn with contractual sales of EGP 11.4bn; followed by Palm Hills in fifth place, with a market value of EGP 4.55bn, profits of EGP 653.3m, and contractual sales EGP 17.3bn.

Nasr City’s profits fell by 72%, to rank sixth, as its profits amounted to EGP 282.8m with a market value of EGP 3.68bn and contractual sales of EGP 2.95bn.

Zahraa Al-Maadi Company ranked seventh, as the company’s profits rose during the past year to EGP 274.8m with a market value of EGP 3.03bn and contractual sales of EGP 227m; followed by the Arab Developers Group — formerly Porto — in eighth place with a market value of EGP 476.3m, profits of EGP 92.9m, and its contractual sales amounted to EGP 1.47bn.

Amer Group ranked ninth with realised profits of EGP 83.2m, a market value of EGP 882.7m, and contractual sales of EGP 4.9bn; followed by Heliopolis Housing in tenth place with realised profits of EGP 16m and a market value of EGP 6.52bn.

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