Price Increases

[lyndsay552]

As most people on this forum know, i'm trying to buy a villa in hurghada but i feel like i'm banging my head of a brick wall.

I understand that the prices are on the increase in Hurghada but I've been enquiring about a few re-sale properties and I keep getting emails back saying that the property has been on the market for a while and as such the price has increased and it usually increases by about £20k!!

If the same situation occurred in the UK, ie a property has been on the market for a while and has not sold, the price would decrease, not increase.

Sorry, just need to have a whinge to someone lol

Lyndsay

[dave99]

Originally Posted by lyndsay552

As most people on this forum know, i'm trying to buy a villa in hurghada but i feel like i'm banging my head of a brick wall.

I understand that the prices are on the increase in Hurghada but I've been enquiring about a few re-sale properties and I keep getting emails back saying that the property has been on the market for a while and as such the price has increased and it usually increases by about £20k!!

If the same situation occurred in the UK, ie a property has been on the market for a while and has not sold, the price would decrease, not increase.

Sorry, just need to have a whinge to someone lol

Lyndsay

And if the price had not gone up then what would you think !!

Maybe that it will never go a up in value - so it's not a good investment
- think about it !!!

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[propertastic]

Dave99 is right. The reason we are all excited about Hurghada is that all the signs are there for huge capital growth. We can't expect for the prices to hang around and wait for us all to buy something before prices start going up!

I notice that more and more developers are being upfront now about how prices are going to increase - telling buyers that they are going to increase by 10% every six months or whatever.

The situation in Hurghada is different from non-selling properties in the UK because the infrastructure is increasing around the properties at a fast rate.

For example, I have some beachfront villas and chalets (half villas) available in Al-Ahyaa. A client went out to see them and rejected them because he says that 'it was a ghost town in the middle of nowhere'.

This is true. Today.

But they are right slap-bang in the middle of the development zone there. Fast forward a couple of years and they will be surrounded by shopping malls, bars, restaurants, leisure facilities, etc.

They are at GBP400/m2 at the moment. I can't see any way that they are going to be worth less than GBP800/m2 in 24 months' time as the new developments around it are already up to GBP700 at the pre-release stage.

So the developers aren't going to be making any fire sales just yet.

[awahee123]

Hi Nick,

I think if you look at the whole picture over the last couple of years there has been little finished,a lot of the developments are still shells, so to be honest I think we probably should be looking at around 5 years from now.A lot of developments have gone up in the last few years but looking around as i said before very little is finished
it's obvious the developers were in a hurry to put the shells up as this is how most property was sold earlier.
Regarding price increases most of it is supply and demand,materials are increasing in price but the percent of the increses are not justified,however whilst buyers keep paying prices will keep increasing it's as simple as that.

[dave99]

Developers in this market (Hurghada) may be quite different to other parts of the world (for which I cannot offer guidance), in that it seems to be the "norm" to start with very low prices that probably will not even cover the cost of the first few units sold as a way to get sales moving, and to get the cash flowing.

It's no big secret that there is a lot of sense for developers to use the money from deposits etc to part fund a development - if this is not done then the developer has to maybe borrow and pay interest until the cash comes in. If the project is over 2 years or so that's a bit of a risk for buyers therefore they have to decide if the level of discount being offered if a good deal or not.

During the build phase prices go up for a number of reasons, significant cost increases, specification changes, planned increases in line with reduced discounts as the risk is reduced for the buyers.

The whole process is not one of increasing prices just because there is an increased demand - it is all about a planned profit margin that builds in the process described above.

There is a potential risk to both parties, each one having to decide how best to make it all work.

Where arrangements are made for a sort of "draw down" from a secure fund of owners money this is not much different to the sort of payment schemes listed on another thread - being stage payments.

The biggest winners are always the ones who take the biggest risk, and buy before the work on a plot begins - in the current market with currency changes and cost increases anyone who has already contracted to buy is on a real winner - new projects could cost far more than those now in build.

Most agents are well aware of this in this part of Egypt.



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[lyndsay552]

I wasn't talking about apartments which I understand will increase because a lot are being of plan. What I am talking about is resale villas, which have been on the market for maybe 5-6 months.

[Peter Mitry]

Where there are shells awaiting finishing the Developers/owners are clearly waiting for the market to rise to get higher prices. In terms of off plan dave99 is quite correct in his explanation and this is the way Developments in Spain, France, the UK & Morocco have been financed.

However, as Egypt is generally not a credit society there are many of the established Developers who have built using their own funds, rather than waiting for stage payments to come in. Once the contract is signed and they have the 30 or 40% they have most of what they need to complete the building. This gives buyers a degree of confidence as they do not have the bank guarantees as a safety net that they would get elsewhere in Europe.

[dave99]

Originally Posted by lyndsay552

I wasn't talking about apartments which I understand will increase because a lot are being of plan. What I am talking about is resale villas, which have been on the market for maybe 5-6 months.

Maybe a better targetted title for future threads is needed.

.

[Escott]

Originally Posted by propertastic

Dave99 is right. The reason we are all excited about Hurghada is that all the signs are there for huge capital growth. We can't expect for the prices to hang around and wait for us all to buy something before prices start going up!

I notice that more and more developers are being upfront now about how prices are going to increase - telling buyers that they are going to increase by 10% every six months or whatever.

The situation in Hurghada is different from non-selling properties in the UK because the infrastructure is increasing around the properties at a fast rate.

For example, I have some beachfront villas and chalets (half villas) available in Al-Ahyaa. A client went out to see them and rejected them because he says that 'it was a ghost town in the middle of nowhere'.

This is true. Today.

But they are right slap-bang in the middle of the development zone there. Fast forward a couple of years and they will be surrounded by shopping malls, bars, restaurants, leisure facilities, etc.

They are at GBP400/m2 at the moment. I can't see any way that they are going to be worth less than GBP800/m2 in 24 months' time as the new developments around it are already up to GBP700 at the pre-release stage.

So the developers aren't going to be making any fire sales just yet.

The prices you are quoting are for what exactly?