London-based research consultancy Fitch Solutions has released its Q2 2023 report on Egypt’s real estate sector. The company predicts a sharp decline in office rents in 2023. This is due to high inflation, a tight monetary policy, and slowing economic growth.
The average rent in Cairo, the city with the highest rents, is predicted to fall by more than 30% year-on-year to $17.4 per square metre per month. Yet Giza and Alexandria will experience steeper declines of 31.6% to $9.3 and 35.7% to $8.2 per square metre per month, respectively. But, the report predicts a brighter medium-term outlook. Egypt's Real GDP is projecting 5.1% in 2024. Inflation will also start trending downward, and monetary policy loosening.
POTENTIAL FOR EXPANSION IN THE OFFICE REAL ESTATE MARKET
Fitch Solutions notes that the growth of new cities will create more demand for Egypt's office real estate. This will lead to significant potential for expansion over the long term. But, the report also expects a combative monetary policy. This will put pressure on private investment and residential and non-residential construction growth in the near term.
INVESTOR SENTIMENT AND INVESTMENT IN THE BUILDINGS INDUSTRY
Medium-to-long-term government reforms, divestiture plans, and an expected IMF program are expected to support investor sentiment. These will also encourage further investment into the construction of new developments in Egypt.
SUSTAINABLE DEMAND FOR HOUSING
Although residential housing remained subdued in 2020 due to the pandemic, Fitch Solutions expects the long-term fundamentals of Egypt’s residential construction market to remain favourable. The country’s economic diversification agenda, strong population fundamentals, and an annual urbanization rate of 2% support sustainable housing demand over the medium-to-long term.
Egypt’s young and growing population of around 91 million also makes it the most populous market in the Middle East and North Africa region. So, amongst many other reasons, this creates a desirable real estate market for both residents and investors.
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