Egyptians and Foreigners alike are flocking into the property market of Egypt. The country’s growing economy is fueling the real estate market. New oil money is at a surplus, causing a drop in the Egyptian Pound (L.E.). This in effect has made the Egyptian property market lucrative for Britons. In the last few years, prices have increased by as much as 50%, spelling ample profit for potential investors.

The Cement and Steel Dilemma

Building costs in Egypt have sky rocketed by 27%, beginning January of 2008. This sudden increase is caused by the upsurge of steel rebar and cement values. Lately, steel is selling for 5,300 L.E.’s per tonne compared to last year’s 3,900 L.E. Last December, cement sold for 380 L.E. per tonne, today it is being marketed for 500 L.E.

This problem is making property developers a bit nervous because real estate costs may discourage potential financiers, and private individuals to back off and look elsewhere for cheaper fare. This moving away by possible buyers can very well bring down the Egyptian economy. General Section of Real Estate Investment Chairman Mr. Hisham Talaat Moustafa was quoted as saying “GSREI would not overlook escalating prices in steel and cement that will eventually affect not only the building and construction industries, but also domestic economy and society in general." 

Despite this, some faction’s still remain confident. In fact, HC securities released this statement, “Nevertheless, construction sector in Egypt is growing remarkably, fueled with heavy Gulf investments. Dwellings average price per square meter reach levels that are as high as EGP 8,000. Investments will continue to pour into the economy, fueling growth across the board. Egypt has been attracting investments and with a US slowdown and a possible similar scenario taking place in Europe, Gulf and foreign investors will be more interested in investing in Egypt, especially since growth rates are expected to remain strong in fiscal year 2007-08.”

Gulf Invasion

This assertiveness on the side of some of Egypt’s real estate developers stems from the verity that Gulf investments are going and growing strong in Egypt. UAE firms are venturing into the Egyptian real estate industry and are undertaking massive constructions.

Most UAE real estate giants are focused on creating high end residential and tourist destination geared toward the British consumer market. Regardless of common knowledge, these real estate giants can acquire Egyptian land for a cheaper price than other smaller investors. If truth were told, Damac, one of Dubai’s Real Estate Powerhouse obtained land near Gamsha and paid only $1 per square meter.

With Gulf Investors pouring their money into Egypt, there seems to be no apparent danger of an Egyptian property crisis, “Emaar Properties revealed investments of around USD 5.8 billion in four projects nationwide. Market rival, Damac, is pouring in USD 22.9 billion in four luxury residential projects in Egypt. Similarly, Dubai Holding Company revealed intentions to invest some USD 4 billion in real estate projects in Egypt. Al Futtaim Group also plans to bring Dubai Festival City to Cairo with investments totaling USD 3.4 billion.”

Even so, the selling prices of properties built by UAE contractors are way above a Middle Class Egyptian’s means. After all, they are geared toward UK and Europe. Yet according to Tarek Ali, a well-known Egyptian property market developer, 'Even though the prices are high to the average Egyptian, around 50% to 70% of the properties sold are to Egyptians,'

Egypt’s Indexes are Falling!

For a second day, Egypt’s big cap stocks have taken a dive pulling down the main indexes. Hashem Ghoneim, CEO of el-Nour Securities said "Falling international markets on Friday had a negative impact on foreigners' favorites," Oil prices are climbing and the Stocks in the United Kingdom, Europe, and America are falling. Federal Reserves are scrambling to alleviate tight credit markets.

Even the shares of a heavily traded company like Orascom Construction Industries are falling. They lost 674 L.E. to 0.9%.  EFG-Hermes also lost 2 percent to close at 59.25 pounds. As a whole, the benchmark CASE 30 index ended lower at 11,280.23 points, that’s a drop of about 1%. Well-watched Hermes index lost 0.8 percent to 99,161.68 points.

Ghoneim stated: "This was due to the heavy weight of blue chips like Orascom and EFG-Hermes in the two indexes, but the market saw also shining performances in real estates and textiles,"

Any savvy British investor will now deign to ask if Egypt is heading for a free fall or if all the hype over the property market a ruse.  Actually, the answer is no. The real estate stock market of Egypt is still cruising in green pastures. This is similar to the already mentioned Gulf Investments that have secured Egypt’s property market in a safe niche.

Nonetheless, there are still challenges up ahead. Egyptian real estate must learn to balance the supply and demand system in order to have the staying power in the International property market race.