Hesitation Haunts Clients?
Over the years, experts have been reckoning residential property leasing as: “An existing trend for non-homeowners who cannot afford to acquire houses.” But does this mean that would-be shoppers are resorting to rentals as housing options in the wake of the current Coronavirus crisis, specifically in Egypt?
According to Aqarmap’s “Egypt Real Estate Demand Index,” there was a toll in the local property sector last March, which is the same month COVID-19 was declared a pandemic, as home-buying demand dipped 20%, whereas demand for renting remained stationary.
“On one hand, there is seemingly no significant uptick in leased residences. On the other hand, the middle-income group is exhibiting healthy demand for buying real estate, especially with the continuous property transactions being sealed during the pandemic,” Iwan Developments CEO Waleed Mokhtar explains.
The upper-class segment might as well be dominant on the local purchasing front at present, given the ongoing efforts to steadily fuel demand for real estate. Currently, various entities seek to ease the daunting financial burden of home buying in Egypt, namely bank and mortgage loans, along with diverse flexible and extended payment plans by financing firms and property developers.
Late last year, the Central Bank of Egypt (CBE) had given the go-ahead for middle-income home buyers to access EGP 50 bn in subsidized mortgages, at a preferential 10% interest rate, under the state’s mortgage finance program. The funds are being channeled either through mortgage lenders or state-affiliated banks, which the government either fully owns or in which it holds a stake, on homes of up to 150 square meters, and a maximum price tag of EGP 2.25 mn.
“Down the line, there may be a shift from owning to renting [residences] due to present uncertainties, paired with multiple factors such as furloughs, layoffs, and pay cuts, which will certainly put a dent into consumers’ disposable income. Even for those still being regularly paid, some ambiguity would underlie their decision-making,” Iwan Developments’ CEO anticipates.
The fact remains that real estate purchase is much of high-risk investment and often requires consumer confidence, on top of sustainable long-term cash flows as well as trust in developers’ capability to conclude the selling process without delivery delays or other shortcomings.
In like manner, the 2020 real estate sales are already being dampened by Coronavirus fears, as social distancing measures create major challenges for businesses, with some of the fundamental property exhibitions, events, and launchings postponed to curb infection spread.
Ultimately, in a dollarized world, no country is immune to crisis. But one good thing: Egypt will be the only MENA economy to (just barely) see its economy expand in 2020, the International Monetary Fund (IMF) predicted in an April press release. The fund now projects GDP to grow at a 2% clip this year, before accelerating slightly to 2.8% in 2021.
Photo by Omar Elsharawy on Unsplash.