One of the main drivers behind the recent increase in rents is surging demand caused by an influx of Sudanese fleeing the violence in their home country.
"They are willing to pay any price and that causes an imbalance in the market," Mohamed Hassan, investment funds director at Odin Investments, told Ahram Online.
"The increase in Sudanese refugees and expats boosted demand on certain middle-class and upper-middle-class neighbourhoods in Cairo and Giza, including the 6 October city and El-Rehab," Alaa Hamed, a property consultant at Coldwell Banker, commented.
This is not just a temporary problem.
"The continuation of the conflict will force more Sudanese people to enter Egypt, which will lead to more increase in demand and – therefore – a surge in rents," Hamed stated.
Since the crisis began in April, some Sudanese in Egypt have expressed their discontent with a threefold increase in rent, as highlighted in a recent AFP report.
Egyptian President Abdel-Fattah El-Sisi reported that over 200,000 Sudanese refugees fled from Sudan to Egypt between mid-April and mid-June.
However, rents had already risen across the country prior to the outbreak of the war in Sudan.
Data from Property Finder reveals a significant rise in rents in Egypt during Q1 of 2023 compared to the same period last year. On average, rents increased by 24 percent, with two-bedroom and three-bedroom apartments experiencing a respective increase of 23 percent and 22 percent.
New Cairo city and Hay El-Maadi saw the highest increase, with the cost of both two-bedroom and one-bedroom units increasing 30 percent.
Inflationary pressure
The rent increases across Cairo and Giza before the Sudanese crisis can be attributed to the inflationary impact that has affected Egypt since March 2022.
Egypt's annual headline inflation rate reached a new record high in July 2023, surging to 38.2 percent compared to 14.6 percent in the same month of 2022. Inflation is projected to average 32.3 percent for 2023, a significant increase from the averages of 5.2 percent in 2021 and five percent in 2020.
The situation is only expected to get worse, with another expected devaluation of the Egyptian pound on the horizon. This devaluation is a crucial obligation of the Egyptian government as part of its four-year, $3 billion loan agreement with the IMF.
Egypt has reduced the value of its local currency by roughly 50 percent against the US dollar since March 2022 by devaluing it three times.
The soaring cost of construction due to inflation is also expected to drive a shortage of units, increasing housing costs further.
CAPMAS data reveals a decline in the supply of new residential units in Egypt, with a total of 246,100 units constructed in FY2021/22. This represents a significant decrease of 36.65 percent compared to the previous year. Among these units, 69,800 were classified as middle class (28.3 percent), 13,800 as upper middle class (5.6 percent), and 22,600 units were categorized as premium (9.1 percent).
"Rents are prone to increase further as a direct impact of a potential devaluation of the pound or indirectly through the inflation in the property prices, as rent is typically estimated in proportion to the total value of units," Hassan warned.
Squeezed budgets
The share of their income that Egyptian households can afford to spend on housing is also being squeezed by rising food prices, which make up the majority of household expenditures.
According to figures for 2019/2020, Egyptian households spend close to a third (31.1 percent) of their income on food and a fifth (19.2 percent) on housing, according to CAPMAS' previous income and spending report
According to inflation figures from July 2023, the cost of food increased by 68.2 percent annually while rent went up by nine percent.
An Egyptian household's average yearly income increased to EGP 69,060 in FY2019/20 from EGP 58,850 in FY2017/18 and EGP 44,190 in FY2014/15, according to CAPMAS.
CAPMAS data shows that the proportion of Egyptians who are homeowners increased from 80.4 percent in 2017/2018 to 83.8 percent in 2019/2020. Meanwhile, the share of Egyptians who rent decreased from 18.1 percent to 15.6 percent.
The income and expenditure report is released by CAPMAS every two years, with this year’s scheduled to arrive in the H2 of 2023.
Short link: