Egypt’s housing market started to recover in early-2010, after a slowdown in the past two years caused by the global crisis. House prices and rents are rising again. Demand from domestic and foreign homebuyers is coming back. Property transactions are increasing again. New construction projects are also underway.
According to some local real estate agents,
• In the first half of 2010, the price of an apartment in Cairo, the capital, was around EGP 7,500 (US$1,322) per sq. m.
• In new areas of Al-Rhab, Medinat October and Medinat Sheikh Zayed, the average price of apartments was about EGP 5,000 (US$882) per sq. m
• In Maadi, house prices range from EGP 2,721 (US$480) per sq. m to EGP 7,027 (US$1,239) per sq. m.
• In Zamalek, prices range from EGP7,500 (US$1,322) per sq. m to EGP10,000 (US$1,763) per sq. m.
• Real properties located at the Sixth of October were priced from EGP 1,700 (US$300) per sq. m to EGP 5,000 (US$882) per sq. m.
• In Sharm el Sheik, a newly built property costs about EGP261,800 (US$46,160).
• Along the Red Sea, properties are priced under EGP436,400 (US$76,943).
Property prices in Egypt rose 13.7% (4.5% in real terms) in 2005, but then stagnated. House prices dropped 0.4% (-4.4% in real terms) in 2006, and fell 0.6% (-10.4%) in 2007, according to the 2008 Egypt Housing Survey conducted by Bearing Point Inc, which has a cross-Egypt sample. House prices fell further in 2008, due to the global crisis. Then by end-2009, house prices in the secondary market had fallen by about 37%, according to local real estate analysts.
Real estate prices rose by about 5% in the first quarter of 2010, according to some local real estate agents. In 2010, the size of the housing market is projected to grow by about 14%. House prices are expected to rise by about 10% for the whole year of 2010.
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.
According to some local real estate agents,
• In the first half of 2010, the price of an apartment in Cairo, the capital, was around EGP 7,500 (US$1,322) per sq. m.
• In new areas of Al-Rhab, Medinat October and Medinat Sheikh Zayed, the average price of apartments was about EGP 5,000 (US$882) per sq. m
• In Maadi, house prices range from EGP 2,721 (US$480) per sq. m to EGP 7,027 (US$1,239) per sq. m.
• In Zamalek, prices range from EGP7,500 (US$1,322) per sq. m to EGP10,000 (US$1,763) per sq. m.
• Real properties located at the Sixth of October were priced from EGP 1,700 (US$300) per sq. m to EGP 5,000 (US$882) per sq. m.
• In Sharm el Sheik, a newly built property costs about EGP261,800 (US$46,160).
• Along the Red Sea, properties are priced under EGP436,400 (US$76,943).
Property prices in Egypt rose 13.7% (4.5% in real terms) in 2005, but then stagnated. House prices dropped 0.4% (-4.4% in real terms) in 2006, and fell 0.6% (-10.4%) in 2007, according to the 2008 Egypt Housing Survey conducted by Bearing Point Inc, which has a cross-Egypt sample. House prices fell further in 2008, due to the global crisis. Then by end-2009, house prices in the secondary market had fallen by about 37%, according to local real estate analysts.
Real estate prices rose by about 5% in the first quarter of 2010, according to some local real estate agents. In 2010, the size of the housing market is projected to grow by about 14%. House prices are expected to rise by about 10% for the whole year of 2010.
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.
Analysis of Egypt Residential Property Market »
RENTAL YIELDS
Last Updated: Aug 30, 2011
Cairo, Egypt, is still a town of inexpensive apartments. Given the chaos that is Cairo, many will say: this is understandable! Yes although prices have risen strongly in recent years, the average apartment in an elite area is still priced at around US$1,000 per square metres.
Yields in Cairo are more or less unchanged on last year at around 7%. But this figure actually disguises the true diversity of renting in Cairo.
Yields are much higher in areas which appeal to foreigners such as Maadi, where gross rental yields around between 10% to 12%. Yields are lower in largely ‘local’ areas, such as Heliopolis. Yields can also be surprisingly good on large apartments in central Cairo.
Yields in Cairo are more or less unchanged on last year at around 7%. But this figure actually disguises the true diversity of renting in Cairo.
Yields are much higher in areas which appeal to foreigners such as Maadi, where gross rental yields around between 10% to 12%. Yields are lower in largely ‘local’ areas, such as Heliopolis. Yields can also be surprisingly good on large apartments in central Cairo.
TAXES AND COSTS
Last Updated: Jul 11, 2011
Rental Income: Rental incomeis 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.
For properties located in the Egyptian cities, a flat rate of 2.5% of the gross proceeds is levied on sales of real estate or building sites. No deductions are allowed.
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.
For properties located in the Egyptian cities, a flat rate of 2.5% of the gross proceeds is levied on sales of real estate or building sites. No deductions are allowed.
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: Sep 14, 2010
Economic growth continues, but inflation still high
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 4.7% in 2009, amid the global crisis. In 2010, real GDP growth rate was projected to be 5%, based on latest figures from the IMF.
In the second quarter of 2010, economic growth accelerated with an annualised GDP growth rate of 5.9%, up from 5.8% in Q1 2010 and 5.1% in Q4 2009. The construction sector grew by an annualised 13.2% and the IT sector by 12% over the same period.
Despite continuous economic growth, inflation is still a major problem. The headline inflation rose to 10.7% in June 2010 from 10.5% the previous month. Core inflation, which excludes prices of fruits and vegetables, and regulated items, was 6.7% in June 2010, almost unchanged from a month earlier, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).
Inflation rate is expected to ease slightly to 10% in FY2010/11 and to 9% in FY2011/12. Due to soaring commodity prices, inflation reached 18.3% in FY2009/10, more than thrice the GDP growth rate over the same period.Tourism, which makes up about 16% of GDP, is expected to recover in 2010 as many low-cost airlines offer cheap flights to the country on a daily basis. The tourist sector is projected to grow by 6% in 2010.
After plunging in the past two years, the real estate sector recovered in the first half of 2010. The real estate market constitutes about 8.6% of the country’s GDP.
In 2009, the unemployment rate was 9.4%, from 8.7% in 2008, according to the Central Bank of Egypt (CBE). In the first quarter of 2010, the unemployment rate slightly dropped to 9.1%.
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 29 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.
The next presidential elections will be held in 2011.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In