Egypt: Overview

RENTAL YIELDS

Last Updated: Aug 22, 2008

Rental yields in Maadi are still spectacular

Rental yields in Maadi are still spectacular at an average of 12%. Although 5% lower from 2007 Global Property Guide estimates, foreigners still like to live there. Prices start from US$600 per sq. m., to around US$1,000.

Yields for Mohandesseen apartments are excellent at an average of 7%. Mohandessine remains to be attractive to rich locals. Apartments in the Heliopolis district, cost around US$ 141,000 to buy for a 155 square metred sized property and US$318,00 for properties nearly twice that size.

Overall average of 9% for all Egyptian districts, ranging from 6.28% to 12%.

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TAXES AND COSTS

Last Updated: Nov 27, 2008

Moderate taxes in Egypt

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%.

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BUYING GUIDE

Last Updated: Oct 02, 2007

Moderate costs; complicated buying process

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.

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LANDLORD AND TENANT

Last Updated: Jul 25, 2006

Egypt's landlords are weakly protected by law

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.

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ECONOMIC GROWTH

Last Updated: Oct 01, 2007

Continued economic growth

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$1,518.

There is a sense of optimism in Egypt. Though the economy continues at a modest annual 5% GDP growth, inflation has been dramatically reduced from 11.40% in 2005 to 4.40% in 2006. The privatization and customs reform measures announced in late 2003 and early 2004 have begun to take effect. Egypt is benefiting from new money from the Gulf, which sees it as less risky than either Lebanon or Jordan, and is increasingly being used as a business process outsourcing centre. In addition, there is enormous interest in Egyptian property from Europeans.

Pressures on the overvalued Egyptian pound led the government to float the currency in January 2003, leading to a sharp drop in its value. The lower currency has allowed expatriate Egyptians to enjoy huge drops in real estate prices, which has helped boost the property market. Since the war in Iraq in 2003, tourism and Suez Canal revenues have fared well.

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 25 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 – for the present.