“No doubt real estate prices will follow suit, probably at a higher rate than the increases in the prices of steel and cement,” said Fathallah Fawzi, deputy president of the Egyptian Businessmen’s Association and a real estate developer.
Real estate companies had already been obliged to raise their prices after the floatation of the pound in November 2016 following the increase in the prices of building materials, Fawzi explained.
Most real estate companies sell units before building them. Buyers pay down payments, and installments are divided over several years. Price increases in building materials are therefore shouldered most by real estate developers, explaining why they are wary of rising prices.
“Real estate companies will likely raise their prices for the next phases of their current projects,” Fawzi said.
Fawzi expects a 20 per cent increase in the price of units after steel and cement prices increased. Before the recent increase, prices were already anticipated to rise by 10 to 15 per cent.
Officials at the Chamber of Metallurgical Industries (CMI) in Cairo told the media this week that increases in the price of steel pallets on the international market was the reason behind the local price increases.
“Steel pallets increased by $10 per ton, reaching $556, and this led to the recent increase in the price of local steel,” CMI officials stated. Increases in the international price of scrap metal is another reason why local steel prices have increased.
The price of cement increased by some LE250 per ton to reach LE1,100 at the beginning of March. Members of the Building Materials Division of the Cairo Chamber of Commerce said some cement factories had used the halt in cement production in Sinai to raise the prices of cement.
Mohamed Magdi, a real estate analyst with Sigma Capital in Cairo, said that companies that had not announced new projects lately were unlikely to be affected by the recent price increases in building materials.
However, companies in the construction phase and that have already sold units at pre-increase prices would likely suffer losses, he said.
Future projects would also likely put the recent increases in the prices of building materials on the shoulders of the consumer, said Mohamed Marei, a real estate analyst at Prime Securities in Cairo.
A 15 to 20 per cent rise in the prices of real estate units was likely throughout the year, he said.
Despite the recent price increases, cement is not likely to continue at its present higher price, as four million tons of cement are anticipated to come onto the market in 2018, relieving the pressure on prices.
*This story was first published in Al-Ahram Weekly