Property is one of the few areas that has benefitted from the uncertainty and instability of post-revolutionary Egypt. As investors have become jittery and the government has introduced capital controls, money has flowed into real estate.

It is unsurprising then that the sector has witnessed strong growth in 2014-15. However, the market is bifurcated, showing two distinct dynamics at opposite ends of the spectrum. Rising prices and increased supply in the upper end of the market combined with the apparently growing appetite for flipping properties could pose as an early warning sign of a bubble forming.

Further down the income scale, no such problem exists. Indeed, the opposite is true – rampant demand remains unfulfilled because of a lack of supply. Given these contrasting trends in what amounts to a two-tier market, 2016 will be crucial in determining the long-term health of the sector.

Sector Performance

Even before the revolution of 2011 the real estate sector was one of the hottest investment areas in the country. According to the Ministry of Planning and International Cooperation, property growth rates topped 15% in the lead up to the revolution.

Unsurprisingly, as with all facets of the economy, the immediate aftermath of this event constricted investment flowing into the sector. Total investments in real estate fell for two consecutive years running following the revolution, according to a report by Madinet Nasr Housing. Between 2013 and 2014, investments fell by 7% to LE29.6bn ($4bn) as investors remained out of the market.

However, this trend was short lived, and the market has generally remained robust and positive despite political and economic uncertainty. Indeed, in many ways, the current situation has benefitted the sector. A negative real interest rate, coupled with the devaluation of the Egyptian pound, has seen domestic investors push their cash into real estate as a safe investment.

This trend has also been stimulated by the capital controls introduced by the Central Bank of Egypt in February 2011. According to the media, under the regulation, the bank set a limit of $100,000 in foreign transfers for individuals with no time limit. While this was loosened at the beginning of 2014 to allow one $100,000 transfer per individual per year, it has still ensured that there remains a strong domestic funding base, much of which is turned towards property.

The focus of investors on real estate is clear from the sector’s performance in 2015. In the first quarter of 2015 alone, property investments in Egypt increased by 30%. Consequently, residential sales prices have increased by as much as 20% depending on location, while land prices have increased by 35%, according to Ibrahim Al Shawarby, a member of the International Real Estate Federation, in conversation with the media.

In the second quarter of the year, residential sales in Cairo continued to perform strongly. In its “Cairo Real Estate Market Overview” for the quarter, Jones Lang LaSalle reported an annual residential sales price increase of 8% for apartments in the suburb of New Cairo and 26% and 23% for apartments and villas, respectively, in 6th of October City, although sales prices for villas in New Cairo in the same period dropped by 7%.

In many ways, this is simply the continuation of a strong performance by the formal real estate sector over the last 18 months. In 2014, for example, the six largest listed developers increased their sales volumes in terms of units by 20%, shifting almost 13,000 units. Furthermore, the value of off-plan sales for these companies increased by 40% to LE25.9bn ($3.5bn) in the same period. These figures are particularly notable given the macroeconomic headwinds of the last four years: real GDP growth has remained persistently sub-par, failing to exceed 2.2% in the years since the revolution, according to the IMF. Furthermore, unemployment during this period moved into double digits, hitting 13% in 2013, a figure that has remained the same in 2015. Meanwhile, national savings decreased by 27.1% between financial year 2009/10 and 2012/13, according to HC Securities and Investment (HC).

High-End Benefits

In theory, these downward trends should create challenges for property developers. However, considering that the formal market, which includes the large-scale projects of listed developers, caters to a small segment of society, these general trends do not paint a full picture of demand and offer only a partial view.

According to HC, most listed developers are catering to the upper-middle segment of the market, with unit prices ranging from LE800,000 ($109,040) to LE2.5m ($340,750), monthly customer incomes of LE50,000 ($6815) and average monthly payment installments of LE19,479 ($2655) on a unit of 220 sq metres in size.

At this end of the market, real estate is largely seen as a safe haven against inflation and the devaluation of the Egyptian pound. “Purchasing power is increasing the level of investment,” Moheb Abdel-Bary, vice chairman of Stanly Group for Investment and Real Estate Development, told OBG. “Real estate is seen as a safe bet, and it will likely continue to be so, though we need to raise the standards of buildings and communities.”

The performance of the country’s six largest developers seems to bear out this point: in 2012 – the year following the revolution and the year in which the government introduced capital controls – off-plan sales for these developers exceeded pre-revolutionary levels, according to HC, at LE12.7bn ($1.7bn). This trend has continued with their off-plan sales increasing by 46% to LE18.5bn ($2.5bn) in 2013 and 40% to LE25.9bn ($3.5bn) in 2014. In the first quarter of 2015, off-plan sales grew by 32% year-on-year to LE7.7bn ($1.05bn). These substantial figures are the result of both the volume and value of sales. “Real estate is thought of as a very safe investment In Egypt,” Maged Helmy, chairman of development firm Wadi Degla, told OBG. “People continued to invest in property through the downturn of the past few years and still made money, which cannot be said of those who invested in the stock market.”

Activity at the high end shows little sign of slowing. For example, real estate developer IWAN Group has built a range of compound developments in Cairo, including Jeera in 6th of October City, which opened in 2013 and has already delivered 80% of its units. The company’s Jedar compound, located in west Cairo, is due to hit the market in 2017 and its Atrio development in Sheikh Zayed City is set to come on-line by 2018. Developments of this nature have become increasingly popular in recent years given security concerns – a preoccupation for wealthy Egyptians and expatriates.

Price Rises

The rush to real estate has led to a rapid price escalation for certain flagship projects in the capital. The 6th of October Development and Investment Company’s East Town project in New Cairo, for example, has seen prices double from LE5500 ($750) per sq metre to LE11,000 ($1499) per sq metre in the last two years, according to Business to Business for Investment and Real Estate Marketing (B2B), a local specialised brokerage and consultancy firm.

The substantial increase in unit prices could sound a potential note of caution for the market moving forward. Indeed, the average unit price for the six leading developers, which ranged from LE900,000 ($122,670) to LE4.3m ($586,090) in 2014, increased at a rate well above the growth of disposable income, which grew at a rate of 16% in 2014/15, while average unit prices for the leading developers increased by 21.1%. Unit prices for the developer Emaar, which experienced the highest recorded sale price escalation, increased by as much as 38.7%.

There is also strong activity on Egypt’s North Coast, a popular summer retreat from the stifling heat of Cairo, where holiday homes are in strong demand. “Given that the entire Egyptian population lives on only 5-7% of the country’s land, it is essential that new land is developed in order to absorb increased demand for housing,” Darwish Hassanein, CEO of SECON, told OBG. “New cities such as those being planned for the north-west coast are a step in the right direction. The same plans are considered for the south and east of Egypt as well as the Suez Canal Axis, including Sinai and the new administrative capital. In 10 years time, I expect utilised land to be no less than 20% if these projects are carried out.”

B2B’s prediction that 40,000 new units would be added to the North Coast market in the summer of 2014 serves as an illustration of the fact that, alongside the eastern suburbs of Cairo, this is the primary property destination in the country. In many ways, the market here is much easier to read, as prices in this locale are very transparent.

“You have seasons. For example, during the summer season, developers increase prices and then they will increase them once more once the season starts,” Amany Sadek, a research and business development executive at B2B, told OBG. “A client will know when their investment is going to pay off. If they make a down payment in January, for example, in August they will get their investment back, considering that the market dynamics are stable and not affected by any external factors.”

Capital Gains

However, such rapid escalation is not primarily being fuelled by end-users. There is also some evidence of a trend towards flipping properties in this segment of the market, although it is not clear how widespread the practice is. This suggests that the normal metrics to assess demand, which are based on income and savings, could be somewhat skewed in certain areas of the market. Indeed, investment in the Cairene market, particularly in the eastern suburbs, is done with a strong focus on capital gains.

Egypt, however, has certain characteristics that should protect its property sector from a potential bubble. For example, the balance sheets of the leading developers look healthy, with little debt on their books. Madinet Nasr Housing Company, for example, had total assets worth LE1.59bn ($216.7m) and current liabilities worth LE796m ($108.5m) in 2014, while leading developer Talaat Moustafa Group reports total assets of LE37.9bn ($5.2bn) and current liabilities of LE28.9bn ($3.9bn) as of June 2015. Furthermore, most customers in the market are cash buyers who have not had recourse to bank finance; the mortgage penetration rate in the country stood at just 0.84% of GDP in 2013, according to the American Chamber of Commerce. These two facts alone should ensure that any sentiment shift and price drop is contained. However, the market is also supported by strong fundamental demand that will help to protect it from any precipitous fall.


Ultimately, in spite of the increased tendency towards speculation at the higher end of the market, there is a substantial core of domestic end-users in Egypt, guaranteeing a strong demand that should ultimately help to buoy developers over the long term. “Talk of a bubble forming in the sector is misplaced, as there is real demand in the market,” Khalid Bahig, vice president and CEO of Coldwell Banker New Homes, told OBG. “There are more than 300,000 marriages each year, for instance. Real prices are also much lower in Egypt relative to those in other countries in the region.”

Although this is difficult to capture specifically, using standard metrics such as income, the general trends point to an underserved market in all property segments. Indeed, using new marriages as a proxy for property demand in the market, the signs are encouraging. According to HC, off-plan property sales in 2014 will account for approximately 5% of all Cairo marriages when the units are delivered in 2017. In the upper-middle segment of the market, to which listed developers cater, units delivered in 2014 accounted for just 3.6% of all Cairo marriages.

There is certainly substantial real demand across the market. The urban housing supply gap stood at 62% of demand in 2014, according to HC. With aggressive building plans, this figure should come down to 21% by 2016, but this drop still indicates strong market dynamics for developers. In Cairo, the supply gap is estimated at 45% of demand in 2014, decreasing to 33% in 2016.

Yet demand is not consistently spread across the market, and both private and public money will be needed to fill the existing gaps. Mostafa Fotouh, CEO of Misr Al Mahrousa, told OBG, “Most of the demand is concentrated in lower & mid-end developments, which typically range between LE300,000 ($40,890) and LE600,000 ($81,780) per unit. However, due to the price of land, which puts strains on profitability, the majority of low-end projects can only be undertaken by the public sector and the private sector can only participate in the mid-range projects.”

Market demand is likely to remain robust going forward. The IMF predicts Egypt’s GDP growth to increase to 4% in 2015, followed by a further uptick to 4.3% in 2016. This should help bring unemployment down and support the country’s encouraging income trends. Disposable income has grown by a considerable 86.2% since the 2011 revolution, reaching LE2.48bn ($338m) in 2014/15. This spending power is supported by Egyptian expatriate remittances, which reached a record high of $18.45bn in 2013/14, up from $18.4bn in 2012/13, according to the press. These capital flows have been growing strongly, increasing to 7% of GDP in 2013, up from 3.5% of GDP in 2010. As such, remittances, alongside tourism and Suez Canal revenues, are currently one of the most important sources of currency inflows to the Egyptian economy and an important driver of property purchases. According to a 2010 study on Egyptian remittances by the International Organisation for Migration, real estate received the largest share of investments from remittances, accounting for 39% of all remittances invested in the country.


These trends point to greater possibilities for home purchases in Egypt. However, while demand does appear to be there, unit prices are beginning to stretch the issue of affordability. According to HC, the available housing installment payments for low-price units in the low-income bracket of the market can often take up over 70% of an average customer’s monthly income.

Although the cost of housing is less burdensome in the middle-and upper-income segments of the market, it is still significant. According to HC, in the upper-middle segment of the market, the primary targets of most listed and formal developers are salaried workers who earn, on average, LE600,000 ($81,780) per year. Real estate installment payments typically consume 39% of this income. This is without taking into account the down payment for the property, which is usually funded through family or individual savings.

As a point of comparison, mortgage repayments in the UK have remained under 20% of income for the majority of the last two decades and hit a 20-year low of 16% following an interest rate cut in 2009. In Egypt national savings have dropped by an average of 10% per year since the 2011 revolution. This could also hamper demand.

In February 2014, according to the press, the Central Bank of Egypt announced plans to provide financial support to the banking sector to enable it to offer discounted mortgage loans. In December of the same year, the bank announced that it would double the pot of available funds for this initiative to LE20bn ($2.7bn) in 2015. Under the scheme, banks will receive a discount on mortgage prices for 20 years, so that they can issue mortgages at 7% to low-income customers and 8% for middle-income customers. Such a move will help moderate the cost of financing which has remained a considerable obstacle to mortgage uptake in the country.

This move will support other initiatives aimed at streamlining the mortgage process. According to Hoek-Smit, this will include efforts to improve the registration process of property in Egypt, given that in Cairo only 25% of properties have a registered title, and the introduction of a mortgage refinancing company in 2006. Such measures are a reason to be optimistic that the current low penetration level will begin to climb in the coming years.

Low-End Supply

Therefore, although the likelihood of a substantial fallout from this rush to real estate seems minimal, it points to a two-tier system, in which the middle and lower segments of the market, with average monthly incomes below LE50,000 ($6815), are underserved. As such, the government has been working on a number of measures on both the demand and supply side to remedy this situation. This includes initiatives to support the growth of a mortgage industry. With low penetration in the home financing segment, there is little opportunity for developers to build for the lower-income segments of the market at a profit, which remains a challenge.

The government is therefore also trying to address this issue on the supply side. According to the media, in the first quarter of 2015, the government announced plans to offer land for development under revenue sharing agreements with private developers. Such a measure may help to offset the high inflation in land prices, which is one of the main impediments to delivering affordable units. In 2014 the government also announced an agreement with the UAE-based contractor Arabtec to build 1m homes across the country over the next decade at a cost of $40bn, and, in September 2015, press reports indicated that, under this initiative, 100,000 homes would be built in the next five years, although only 13,000 have currently been agreed to.

Suburban Building

Given that the home building programme could be subject to future revisions of its scale, it stands to be overshadowed in its impact on the real estate sector by another of the government’s recent plans. At the economic investment conference in March 2015, Mostafa Madbouly, minister of housing, announced plans to build a new administrative capital city at a cost of $45bn. The new city will be located to the east of New Cairo, and the first phase alone could take up to seven years to complete. The project aims to create 1m jobs and housing for 5m residents.

While the city still only exists on paper and, as yet, does not have a name, it is already having an impact on Cairo’s real estate market. Indeed, land prices in the east of Cairo, closest to the location for the new capital, have grown rapidly on the back of the announcement, according to HC. For example, in Mostakbal City, the largest mixed-use development in the east of the city, land prices under auction more than doubled between February 2014 and April 2015, following the government’s announcement. In the latter month, prices had reached LE1608 ($219) per sq metre. This suggests that the city of New Cairo, established in 2000, and the eastern suburbs will remain an area of particular focus for developers moving forward.

Office Sector

Although most of the attention has focused on residential projects, interest in commercial development is also set to rise. “Since the beginning of 2015 things have been improving. Demand is picking up and is mostly coming from companies relocating from downtown areas to New Cairo or 6th of October City,” Youssef Abdelwahab, manager of the Egypt office at Jones Lang LaSalle (JLL), told OBG.

New Cairo, which has already seen heavy residential, retail and educational development, is rapidly becoming the most sought after commercial area in the capital. The majority of companies moving to the area are already well-established in Egypt and are transferring from co-opted residential space in the centre of Cairo to dedicated office space in the suburbs.

Cairo Festival City, also east of the capital, is currently among Cairo’s prime locations. Rental rates in the area had reached $35 per sq metre as of July 2015, significantly above the market average, according to Abdelwahab. In the second quarter of 2015, although office rental rates stood at $360 per sq metre per year in central Cairo and $312 in New Cairo, the younger city is quickly catching up with the established downtown district. According to JLL’s “Cairo Real Estate Market Overview” for the second quarter of 2015, rates in New Cairo were up 4% from the second quarter of 2014, while in central Cairo they were down 14%.

This in itself is a sign of a market on the up. “Since 2011 the market has been over-favourable to tenants. Now, in 2015, it’s becoming more balanced,” Abdelwahab told OBG. In terms of demand, the largest share is coming from the oil and gas sector (43%), followed by ICT (15%), construction (10%), banking (9%) and fast-moving consumer goods companies (9%), according to JLL.

However, while demand is picking up, supply is also increasing, suggesting that any rapid rental increases are unlikely. In Greater Cairo, for example, the vacancy rate in grade A office buildings still stands at 33%. “This does not mean demand is dropping, but rather that supply is increasing. We are seeing rental growth in very few developments. The asking rates will stay the same, but they will not be as negotiable as before,” Abdelwahab told OBG. According to JLL, there is also increased interest from Gulf investors looking at the office sector. As the political situation has improved, investors have revised their yield targets down from 11% to 8%. The latter target, which is similar to the requirements of local investors, is achievable, according to Abdelwahab.

Retail Segment

Increased levels of foreign investment have also extended into the supermarket and hypermarket segments of the retail sector. In May 2015, for example, Saudi-based retailer Azizia Panda United announced plans to develop 16 new Panda supermarkets across Egypt, the first of which opened in 6th of October City, to be followed by five in Cairo by 2016. The remaining 10 stores are expected to be developed across the country over the next two years.

More recently, the LuLu Group announced in December 2015 that it plans to invest $300m to launch 10 new hypermarkets in Egypt over the next two years, after first entering the Egyptian market in 2010. The UAE-based company cited Egypt’s strong economy and high market potential as the primary factors behind its decision, announcing it will also triple its agricultural exports from the country in 2016, and set up food processing centres to process these exports within the country.


The commercial sector, much like the residential sector, is unlikely to witness unexpectedly rapid growth in the near term. Indeed, in both segments, the amount of supply expected over the next three years is modest: JLL forecasts 50,000 residential units and 87,000 sq metres of leasable office space will come to the market during this time. This could in fact be positive due to the current danger, which is particularly present in the formal residential segment, of the market overheating with heavy property speculation. As such, many analysts hope that the segment will see a flattening of prices rather than a crash. However, the biggest challenge moving forward will be the ability of developers to tap into the significant latent demand in the market. For the government this means providing affordable homes to the majority of the population. These moves illustrate the government’s intention to bring greater standardisation and transparency to the sector, while also improving land use rules and the environment for development, while catering to all of the income segments in the country. Yet the market remains split, with different dynamics at opposite ends of the spectrum. Rising prices in the upper end of the market and growing demand for affordability both persist. While there are numerous plans on the table that aim to solve these issues, they are likely to persist in the short-term.