Overall, the real estate industry in Egypt is demonstrating positive signs of growth heading into 2022, data from the latest report by JLL suggests.
Despite the challenging economic backdrop bought on by the global pandemic, all major sectors of the Egyptian real estate market were able to achieve growth or remain stable throughout 2021.
One sector that has seen the highest levels of growth over the past year is Cairo’s residential real estate market, with rents in certain areas rising as much as 8% year-on-year.
At the turn of the year, we take a closer look at how Egypt’s residential real estate market has progressed over the past 12-months. What does this tell us heading into 2022?
40% MORE RESIDENTIAL UNITS DELIVERED IN 2021
Around 19,000 residential units were completed in Cairo in 2021, taking the governorates total residential stock to approximately 227,000. This represents a 40% increase from the previous year, in which 2,500 residential units were delivered.
The majority of the residential supply completed in 2021 was made up by large mixed-use developments, with some developers opting for small-scale projects in attempt to manage cash flows.
The loosening of COVID-19-related restrictions on the construction, transportation, and logistics industries in 2021, as compared to the same period in the previous year, may be partly responsible for this rise.
In 2021, President Abdel Fattah Al-Sisi introduced a government directive to ban developers from offering any units for sale until minimum 30% of the project has been completed. This action from the Administrative Capital for Urban Development is also likely to have boosted the rate of project completion by encouraging developers to quicken time to delivery.
Looking ahead, an estimated 29,000 units are expected to be completed in 2022, a large proportion of which will be located to the east of Cairo. With the Greater Cairo population projected to double in the coming decades, developers will not be short of demand when it comes to residential properties.
A challenge that developers may face could be increased costs of labour and construction materials, which might result in project delays, heightened costs and in the worst cases, project cancellations.
RISING PRICES AND A GROWING POPULATION
Turing our attention towards residential prices, Q4 of 2021 saw an average annual increase of 8% in New Cairo and 7% in 6th of October City. This is a significant growth compared to 2020, when average sale prices in New Cairo and 6th October dropped 10% and 4%, respectively.
One potential driver of this uplift in prices is Egypt’s rapidly rising inflation rate, which Oxford Economics estimated touched 5.3% in 2021. On a micro-level, attractive payment plans offered by developers are also likely to have helped boost sales activity.
One area that significantly increased its offering in terms of residential properties over the past year is the New Administrative Capital (NAC). Several landmark developments such as New Garden City and Capital Residence reached or neared completion, expanding the options for residents looking to relocate to the new city.
Housing Egypt’s key ministries, government buildings and foreign embassies, the New Administrative Capital is set to become the country’s main administrative and financial centre in the coming years. With over 50,000 workers projected to relocate to the NAC soon, the city will see an influx of new residents and developers should benefit from a concentrated demand for accommodation.
We anticipate that steadily rising rental prices and the expectation of a continuing upward trend will attract investors to the Egyptian real estate market in the short to medium-term. However, this may be counterbalanced by decreased levels of sales activity in the short-term due to inflation-led price hikes.
THE RETURN TO THE CITY
Looking at rental prices, Q4 of 2021 saw an increase of 2% in New Cairo, but a fall of 1% in 6th October City. This is one area that underperformed when compared to the previous year, during which rents climbed by 5% and 8% in New Cairo and 6th October City, respectively.
Despite not demonstrating as dramatic growth as in 2020, the rental market in Egypt remained resilient as compared to other markets which seen prices fall as renters moved out of cities in the ‘race for space’.
As the world begins to recover from the COVID-19 pandemic, we can expect to see the return of business travel, heightened office occupancy rates, and the repopulation of cities. As an offshoot of this, Egypt may welcome a higher number of expats to its cities, who according to JLL, tend to favour gated and suburban communities.
All in all, we remain optimistic that rental prices will sustain an upward trend in the year ahead.