A number of investment banks released reports in late 2021 stating that the rising cost of building materials in Egypt would increase the price of real estate.
Al-Ahly Pharos, an investment bank, predicted a 10 per cent rise in real-estate prices, due to an expected 15 per cent rise in the prices of building materials in 2022. The Arab African International Bank expects a 9.3 per cent increase in the cost of real estate in Egypt.
However, even with the rise in the cost of building materials and the subsequent rise in real-estate prices, Pharos foresees growth of 10 per cent in sales this year, especially of fully-finished residential units under the real-estate funding programme for the middle-income bracket.
The programme covers units priced at up to LE2.5 million. Pharos also expects a steady rise in the number of cancellations and extensions of instalment plans.
The Arab African Bank report added that since the beginning of the year steel and cement prices have increased by 40 per cent in Egypt to record LE15,500 and LE1,100 per ton, respectively. It said that other building materials were assumed to have registered 6.3 per cent increases, according to the latest inflation rate.
To maintain their profit margins, real-estate developers would have to increase prices by 9.3 per cent, the bank reported.
Fathallah Fawzi, deputy president of the Egyptian Businessmen’s Association, said real-estate companies would have to raise prices by between 10 and 15 per cent as a result of the rising costs of construction materials or else they would record losses.
The price increase would not affect the purchasing power of individuals, he said, particularly because developers would increase the length of instalment plans. Following the outbreak of the coronavirus pandemic in 2020, the majority of real-estate developers increased their instalment plans from five to eight or 10 years.
Fathallah noted that all the real-estate companies in the Egyptian market are recording growth, as evident in the profit rates of companies registered on the stock exchange. He added that residential units are in high demand due to the growing population.
The majority of real-estate companies registered on the Egyptian Bourse made profits in 2021. The Talaat Moustafa Group achieved a hike in net profits of eight per cent in the first nine months of 2021 to reach LE1.69 billion. Revenues increased from LE10.41 billion in the first nine months of 2020 to LE11.31 billion in the same period of 2021.
Palm Hills Developments’ profits increased by 21.7 per cent in the first nine months of 2021 to record LE653.33 million, up from LE536.55 million in the same period of 2020, while revenues rose from LE3.55 billion to LE5.89 billion in the same interval.
Emaar Misr Developments’ profits increased by 138.9 per cent in the first nine months of 2021 to reach LE2.81 billion, up from LE1.18 billion in the same period of 2020, while revenues rose from LE2.43 billion to LE7.62 billion in the same interval.
Mohamed Al-Bostani, head of the New Cairo Developers Association, said that the competition the Egyptian real-estate market had witnessed in the past two years, coupled with the coronavirus crisis, had led to stability in the prices of real-estate units, though he anticipated price rises in 2022.
Al-Bostani believes the anticipated rises will not reflect negatively on purchases because the market still needs about a million residential units annually, and the private sector does not supply this number on an annual basis.
A number of real-estate companies have already started increasing their prices, he said, adding that he expected this to be gradual, starting at five per cent and followed by another five per cent in three or four months’ time.
*A version of this article appears in print in the 20 January, 2022 edition of Al-Ahram Weekly.