Egypt’s exchange rate crisis at the end of 2023 and the beginning of 2024, coupled with the sharp depreciation of the local currency, led many Egyptians to turn to real estate as a safe haven to protect the value of their savings.

Remarkably, even with the stabilisation of the exchange rate, demand for real estate has remained high, driving prices to record levels.

According to a report by Board Consulting, a real estate consulting company, sales for approximately 10 real estate developers surged by 70 per cent in 2023 compared to 2022. The report noted that the companies generated LE800 billion in sales in FY 2023, up from LE476 billion in 2022, marking a 68 per cent increase.

In response to the growing demand, real estate developers are expanding their portfolios by launching new projects. A report by Dubizzle, a marketing platform, revealed that the number of new real estate projects in the first half of 2024 increased by 50 per cent compared to the same period in 2023, thanks to economic stability following the Central Bank of Egypt’s currency floatation.

Additionally, the pace of project completion has accelerated, with Dubizzle noting that by mid-2024, over 65 per cent of real estate development projects in Cairo had surpassed the halfway mark, while 11.9 per cent were nearing completion.

According to the report, the private sector played a key role in the real estate boom, driving most developments and contributing 68.9 per cent of all investments in ongoing residential projects.

Real estate prices hiked last year, with the North Coast seeing the steepest price increases. For instance, Yasser Bishara told Al-Ahram Weekly that he purchased a unit in the North Coast for LE2 million in 2020, while a similar unit in the second phase of the same project is now being sold for LE5.5 million.

Growth in the real estate market has sparked discussions about who is fuelling the demand, given the inflated prices amid waves of inflation, rising fuel and electricity costs, and their impact on Egyptians across all income levels.

“Buyers in the current real estate market are those with very high incomes, representing about nine per cent of society,” said Alaa Fikri, a member of the board of directors of the Real Estate Investment Division at the Cairo Chamber of Commerce.

This segment can afford to pay installments of up to LE200,000 every three months, Fikri said, adding that the same group includes people with substantial bank deposits who benefit from the returns on high-yield certificates, as well as Egyptians working abroad with strong financial capabilities.

Ayman Bin Khalifa, Arab Developers Holding Group CEO, said that prior to the floatation of the pound in March, real estate purchases were largely driven by the need to hedge against rising prices and the depreciation of the pound. However, at present, purchases are primarily motivated by genuine demand.

Bin Khalifa stated that demand remains strong, and the company projects its sales will reach LE7 billion by the end of the year, up from LE4.5 billion last year, due to the company’s new project announced at Cityscape events. The project will feature commercial, administrative, residential units, and clinics in Mostaqbal City, New Cairo.

Foreign purchases, particularly from expatriates, account for 10-15 per cent of the company’s sales of its projects that include touristic, administrative and commercial hubs, Bin Khalifa said. Workers abroad represent the largest share of the buyers, he noted.

Fikri is of the view that the Sudanese crisis has led to an immediate surge in demand for real estate — and its prices — in Egypt, in contrast to the Syrian crisis, which brought a smaller influx of Syrians into the country. The displacement of Sudanese nationals, beginning last year with the escalation of the conflict, has increased their presence in Egypt, alongside arrivals from Yemen, Somalia, Syria, and Iraq.

Until 26 August, the number of refugees registered with the UNHCR included 469,664 from Sudan, 157,673 from Syria, and 45,079 from South Sudan.

Immigrants include a large number of wealthy people who have contributed to increased demand for luxury real estate, driving prices higher in both the primary and resale markets. Fikri recounted that a villa in one of his projects in East Cairo, initially priced at LE4 million, was resold by the buyer for LE16 million.

However, alongside the growing demand and expansion of new developments, concerns have emerged regarding the potential for a real estate bubble that could result in a period of stagnation for the market.

“The Egyptian real estate market may experience a bubble,” stated businessman Naguib Sawiris, a real estate developer, in an interview with Al-Arabiya TV channel.

Sawiris explained that a bubble could form due to the high costs developers face when borrowing from banks, with interest rates reaching 30 per cent. Additionally, the sharp increases in building material costs widen the gap between the project’s initial pricing and the actual costs incurred during construction.

This could render developers unable to complete their projects or meet their financial obligations to banks, prompting them to sell units at any price to cover their debts, which may, in turn, increase supply and drive down prices, leaving real estate investors facing huge losses.

* A version of this article appears in print in the 17 October, 2024 edition of Al-Ahram Weekly