Last Updated:
Oct 01, 2007
The Egyptian housing market has plunged. In addition, record high construction costs exacerbated the already worsenin¬¬g situation.
By end-2009, house prices in the secondary market had fallen by about 37% to EGP 1.5 million (US$274,725) from EGP2.4 million (US$439,560) a year ago, according to local real estate analysts.
Many homebuyers who made down payments cancelled their orders in 2008, as the nervous atmosphere caused by the global crisis spread to Egypt. Cancellations peaked in the last quarter of 2008 and the first quarter of 2009, said local property developers. The luxury property market slowed particularly sharply.
Property companies adjusted their business models by offering apartments and smaller units, rather than houses and villas. The low-end market has a shortage of about 40,000 units per year. Dwelling prices in this market range from EGP 400,000 (US$73,260) to EGP 500,000 (US$91,575).
Foreigners cannot register more than two pieces of real estate, which cannot exceed 4,000 square metres (sq. m.), and their purpose must be for a family member to live in. The property cannot be sold or rented for the first five years. The purchase sum must be brought into Egypt in foreign exchange. When ultimately rented, property owned by a foreigner must be rented furnished, which has very major tax disadvantages.
One way around these restrictions is the ‘signature validity court verdict’, which is explored in the ‘Buying Guide’. This avoids formal registration, and allows resale of the property immediately.
By end-2009, house prices in the secondary market had fallen by about 37% to EGP 1.5 million (US$274,725) from EGP2.4 million (US$439,560) a year ago, according to local real estate analysts.
Many homebuyers who made down payments cancelled their orders in 2008, as the nervous atmosphere caused by the global crisis spread to Egypt. Cancellations peaked in the last quarter of 2008 and the first quarter of 2009, said local property developers. The luxury property market slowed particularly sharply.
Property companies adjusted their business models by offering apartments and smaller units, rather than houses and villas. The low-end market has a shortage of about 40,000 units per year. Dwelling prices in this market range from EGP 400,000 (US$73,260) to EGP 500,000 (US$91,575).
Foreigners cannot register more than two pieces of real estate, which cannot exceed 4,000 square metres (sq. m.), and their purpose must be for a family member to live in. The property cannot be sold or rented for the first five years. The purchase sum must be brought into Egypt in foreign exchange. When ultimately rented, property owned by a foreigner must be rented furnished, which has very major tax disadvantages.
One way around these restrictions is the ‘signature validity court verdict’, which is explored in the ‘Buying Guide’. This avoids formal registration, and allows resale of the property immediately.
Read Price History »
RENTAL YIELDS
Last Updated: Sep 22, 2009
Prices have been rising fast in Cairo, Egypt. Three years ago, in 2006, it was common to find apartments at US$500 per square metre, or US$46 per square foot. Now most apartments are double that rate at US$1,000 per square metre or US$92 per square foot, while the Egyptian pound has been stable against the US$.
Gross rental yields in Cairo look unexceptional, but our figures disguise the fact that in Maadi, yields are considerably better than they are in Mohandesseen, Zamalek, or Heliopolis.
Gross rental yields in Cairo look unexceptional, but our figures disguise the fact that in Maadi, yields are considerably better than they are in Mohandesseen, Zamalek, or Heliopolis.
TAXES AND COSTS
Last Updated: Nov 27, 2008
Effective Tax Rate on Rental Income |
|||
| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 10.0% | 10.0% | 10.0% |
| Click here to see a worked example | |||
Source: |
Disclaimer | ||
Rental Income: Rental income is taxed at the standard income tax rates. The maximum deduction allowed to cover operating expenses is 50% of the gross rent.
Capital Gains: There is no capital gains tax.
Inheritance: Inheritance tax was abolished in Egypt in 1996.
Residents: Residents are taxed on their worldwide income at progressive rates, from 10% to 20%.
Capital Gains: There is no capital gains tax.
Inheritance: Inheritance tax was abolished in Egypt in 1996.
Residents: Residents are taxed on their worldwide income at progressive rates, from 10% to 20%.
BUYING GUIDE
Last Updated: Oct 02, 2007
Round-trip transaction costs are around 10.85% to 12.3%; mostly consisting of the real estate agent’s fee (2.5% to 3% plus 10% sales tax), legal fees (3%), transfer tax (2.5%) and capital gains tax (2.5%). Investors should be cautious of the complex ownership and registration process; e.g., only around 10% of properties in Cairo are registered and there are numerous foreign-ownership restrictions.
LANDLORD AND TENANT
Last Updated: Jul 25, 2006
Rent: New tenants do not enjoy rent protection. Nor do they have the right to remain in the apartment at the expiry of the contract, although in the socialist past Egypt’s rental market was highly regulated.Tenant Security: If however tenants do not leave, in Egypt eviction can easily take more than a year. So it is preferable to rent to foreigners, who are less likely to overstay.
ECONOMIC GROWTH
Last Updated: Oct 01, 2007
Economic slowdown
Best known for pyramids, pharaohs and the Nile River, Egypt serves as a vital gateway between Europe and Asia. About two-thirds of Europe’s oil passes through the Suez Canal. Egypt has a population of 75 million and GDP per capita of US$2,450 in 2009.From 2006 to 2008, the Egyptian economy grew by a spectacular 7% annually. The economy slowed, with real GDP growth rate of 3.2% in the third quarter of 2009 amid the global crisis, according to the Ministry of Economic Development. In 2010, real GDP growth rate was projected to be 4.5%, based on latest figures from the IMF.
The housing and construction sector were among those performing better although industries like tourism have been hit hard by the global crisis, according to Rachid Mohamed Rachid, Egypt’s Minister of Trade and Industry.The real estate market constitutes about 8.6% of the country’s GDP. During the past three years, annual growth rates of the said market were as high as an average of 22%, according to Egypt’s Ministry of Investment.
During the fiscal year 2009/10, the budget deficit could be well below the officially forecast 7% of GDP, said Minister of Investment Mahmoud Mohieldin.
In December 2009, the unemployment rate in Egypt was at 9.37% from 8.7% in 2008.
The inflation rate in the country was about 16.2% in 2009 from 11.7% in 2008 and 10.95% in 2007. Inflation rate was expected to slow modestly to 8.5% in 2010, based from latest IMF figures.The passing of the Real Estate Finance Law (148/2001) in May 2001 has begun to create a real mortgage market. For the first time since the 1948 civil code, banks can now repossess properties and evict owners who default on loan repayments. The new mortgage lending has been positive for the housing market.
Politics is increasingly a worry. The last presidential and parliamentary elections were highly fraudulent, returning the same president of the past 28 years, Hosni Mubarak, at the head of the same ruling party.
The regime is corrupt and unpopular. Arbitrary arrests touch not only the extremists, but also the middle class. There is general agreement that Egypt's oldest Islamist group, the Muslim Brotherhood, would win any free election. Unfortunately, the Brotherhood’s leadership is low quality, and it has no policies except Islam. Faced with a choice between the corrupt present regime and the Muslim Brotherhood, the middle class will choose the former..
Who, however, will succeed Mubarak? The covert plan is to put in his younger son, Gamal, who is already in charge of the ruling National Democratic Party (NDP)'s powerful Policies Secretariat. But what if some elements in the army object? The danger of a messy interregnum cannot be ruled out.
