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How a weak economy and a booming real estate sector are helping Egypt attract investments
Egypt's new developments in the New Administrative Capital, Al Alamein City, and Ras El-Hekma draw significant interest from GCC investors.
Egypt’s real estate sector is booming as the country focuses on developing modern, luxurious properties, especially in Greater Cairo’s new administrative capital and El Sheikh Zayed. Coastal cities and popular vacation spots are also witnessing rising demand.
In the first half of the 2022/2023 fiscal year, real estate contributed $9.1 billion to Egypt’s GDP, making up 7.1%. Statista projects the sector’s value to reach $1.46 trillion by 2024. This rapid growth has fueled strong investor interest, particularly from GCC investors, who have invested billions in Egypt’s infrastructure and real estate projects.
According to a 2023 Knight Frank report, GCC investments in Egypt’s real estate sector reached an impressive $115 billion. The data shows that six in ten GCC nationals own at least one property in Egypt, and 94% of GCC investors with over $1 million in assets are interested in expanding their real estate portfolios in the country.
Residential properties lead the market in demand, with prices rising by 10% in 2023 due to strong investor interest. Of those surveyed, 68% prefer residential real estate, while branded residences and retail properties attract 30% and 29% of investors, respectively. This trend underscores Egypt’s appeal as a real estate hub for regional investors, driven by its rapidly modernizing landscape and high growth potential.
WHY EGYPT?
Zeinab Adel, Partner and Head of Egypt at Knight Frank Middle East, notes that GCC investors are increasingly attracted to Egypt’s real estate market due to shared cultural and linguistic ties, its strategic proximity, strong economic connections, and growing demand for residential and commercial properties.
“The government’s pro-business reforms, such as liberalizing foreign investment policies and improving infrastructure, have bolstered investor confidence,” Adel states.
Ayman Sami, Country Head, Egypt, at real estate and investment management firm JLL, says Egypt is an attractive destination for real estate investment for a myriad of reasons. He highlights Egypt’s coastal cities along the Mediterranean and Red Sea shorelines as a major draw, with their large-scale entertainment complexes offering diverse F&B and leisure options.
“The demand for properties on the waterfront destinations has garnered much attention, with the Ras El Hikma deal being the most notable this year. We anticipate further investments in these areas due to the strong demand witnessed across coastal cities,” Sami adds.
Real Estate Management Expert Tamer Nabil, attributes the surge in interest to macroeconomic factors. Egypt, the third-largest economy in the Middle East and Arab world with a GDP of $374 billion, boasts a real estate and construction sector contributing approximately 18% to its GDP.
Egypt’s demographic trends —a population projected to reach 116 million by 2024 and a growth rate of 1.6%—are driving housing demand.
“These statistics reflect the robustness of the real estate market in Egypt and demonstrate the substantial demand for property across various socioeconomic classes, explaining the keen interest from investors in participating actively in the Egyptian real estate market,” Nabil adds.
Egypt’s weak economic performance is also seen as a factor, with citizens viewing real estate investments as a hedge against inflation.
“This means that individuals are purchasing properties not only out of necessity but also to safeguard the value of their money. Such economic considerations drive consistent growth rates within the industry year after year.”
Nabil also highlights that GCC investors face few obstacles when entering the Egyptian real estate market, whether politically, socially, or culturally. Egypt’s welcoming attitude towards these investors further simplifies the process. The initial capital required to launch a real estate project in Egypt is significantly lower than in GCC countries.
Additionally, Egypt offers abundant human capital, with highly skilled professionals readily available, making it an attractive destination for real estate investment compared to other nations.
REGIONS OF INTEREST
Developing new areas in Egypt is a key factor in attracting significant attention. The government aims to draw further interest with projects like the New Administrative Capital and New Alamein City, which cost the country $58 billion.
Egypt’s Mediterranean and Red Sea coastlines have become popular destinations for second-home buyers and investors, driving significant growth in the residential real estate market. The North Coast and Red Sea regions, in particular, are highly sought-after for their stunning beaches and luxurious properties.
Adel notes that Egypt’s expanding urban population and significant developments in new cities, such as New Cairo and the North Coast, present lucrative investment opportunities.
“Affordable property prices compared to GCC markets and the potential for high returns, particularly in the hospitality and retail sectors, further solidify Egypt’s appeal as a top destination for GCC investors.”
Nabil highlights significant interest in both East Cairo and the North Coast. Rising demand for real estate in East Cairo, particularly the 5th Settlement and the New Administrative Capital, is driving growth.
In 2023, 61% of units sold in the formal Egyptian real estate market were located in East Cairo, accounting for 54% of the total real estate value.
“This increasing demand is largely attributed to successful governmental initiatives encouraging residents to move to this area, alongside a consistent rise in property values year after year.”
Nabil points out that North Coast properties offer potentially higher profit margins compared to those in East and West Cairo. This, combined with rising lifestyle aspirations among Egyptians, has positioned the North Coast as the second-largest market for second homes.
He references successful developments in the area, such as Marassi Marina by Emaar Properties, Talaat Moustafa Group’s (TMG) North Coast project, and South-Med, which generated sales of almost $6.5 billion in just one quarter.
Sami mentions the same region. “The coastal cities have created a lot of attention recently; however, there are more specialized investor developers who are also looking to develop their businesses in the New Capital or the outskirts of Cairo.”
“Each region/city has different drivers. For example, the East of Cairo is a main hub for offices and multinational corporations. West of Cairo is driven by leisure, tourism, retail and entertainment. Still, in general, the city’s growth corridors East and West remain attractive due to their supply and demand dynamics,” he adds.
A WEAK ECONOMY
Despite the sector’s growth, challenges persist due to Egypt’s weak economy and fluctuating currency. While economic conditions may drive real estate investment, they also present inherent risks.
Nabil highlights currency exchange rate volatility as a significant challenge for investors, especially those relying on foreign currency financing. “Fluctuations in the value of the Egyptian pound against foreign currencies can considerably impact profit margins when converting from EGP to more stable currencies.”
The country’s limited access to foreign currency also makes it difficult for investors to import goods and distribute dividends.
Nabil also points out that bureaucracy and administrative hurdles can hinder real estate development. Excessive bureaucracy and complex governmental processes related to land acquisition, ministerial decrees, and permits can pose significant challenges.
Similarly, Nabil highlights the country’s complex property registration process. ”The laws and procedures governing property registration are often complex, unclear, and subject to continuous change.”
Adel also notes that while Egypt’s real estate market shows strong potential, it is not immune to global economic forces. Rising global inflation and potential economic downturns could influence investor decisions, affecting disposable income and demand for new properties.
Additionally, fluctuating international interest rates may increase financing costs, making investments less predictable. Currency fluctuations driven by shifts in global financial markets could also impact returns for international investors.
FUTURE OUTLOOK
Sami is optimistic about the future of Egypt’s real estate market, believing it will continue to grow due to strong government initiatives, high population growth, foreign buyers, and increased investment from GCC countries.
Nabil says Egypt’s real estate market is expected to expand, reaching $33.67 billion between 2024 and 2029, with a compound annual growth rate (CAGR) of 10.91%.
He notes that the residential market is expected to slow due to rising property prices driven by higher land, building materials, and sales costs. However, the mortgage finance sector will likely grow to support buyers’ limited affordability.
Meanwhile, the commercial real estate market is set to expand, with mixed-use developments underway in new urban areas. Demand for affordable housing could increase once investor challenges and land price issues with the government are resolved.
Adel notes that Egypt’s real estate market will transform significantly over the next decade, fueled by ongoing urbanization and demographic growth.
The government’s Vision 2030 agenda aims to diversify the economy, with major projects like the New Administrative Capital, New Alamein City, and the Ras El Hekma development set to reshape the country’s landscape.
“Increasing demand for mixed-use developments, іncluding residential, commercial, and hospitality sрaces, will continue to attract both domestic and fоreign investors,” stats Adel.
“Enhanced regulatory frameworks and dіgital transformation in real estate processes are аnticipated to improve market transparency and ease оf investment, further solidifying Egypt’s position аs a regional investment hub,” she adds.
