Spanning countries such as Egypt, the UAE, and Qatar, new cities are taking shape in the Middle East’s evolving urban landscapes. These urban developments represent a forward-looking approach driven by ambitious plans and thoughtful designs. The aim is to create skylines prioritizing innovation, sustainability, and modern living.
But as their skylines soar, so do concerns about accessibility for the people meant to inhabit their streets.
The New Administrative Capital (NAC) of Egypt, inaugurated in 2015, is monumental, drawing a substantial investment of $59 billion over the last six years. The capital’s scale is almost on par with Singapore’s, covering a vast expanse of 714 km² and designed to accommodate over 5 million residents. Additionally, it aims to accommodate 100,000 government employees relocating from Cairo to this new frontier.
The NAC aims to embody the concept of a “smart city,” leveraging digital technology to interconnect, safeguard, and elevate the daily lives of its inhabitants. Beyond its technological prowess, the capital aspires to confront and surmount the longstanding challenges entrenched in Egypt’s existing cities.
These issues include deteriorating urban environments, governance deficits, unregulated migration, infrastructure strains, and overburdened transit systems. Similar questions about accessibility are being raised for other cities in the Middle East as well.
Likewise, questions about accessibility are being raised for other cities in the Middle East.
Masdar City, initiated in 2006, has an estimated construction cost between $18.7 billion and $19.8 billion. Located in Abu Dhabi, it is designed for 50,000 residents, pioneering the concept of a net-zero community. This project aims to be a sustainable urban community, a premier business-free zone, and an innovation hub for cutting-edge technologies.
Meanwhile, Dubai’s skyline saw the completion of nine real estate ventures totaling $1.11 billion in the first half of 2023. This surge in construction led to the registration of an impressive 42,583 real estate units.
In Qatar, Lusail City, founded in 2006, reflects the country’s ambitious vision. The development, designed to accommodate 200,000 residents, is Qatar’s largest sustainable project.
Aligned with the country’s National Vision 2030, Lusail City’s goals are to integrate real estate development and environmental consciousness. The focus on eco-friendly practices includes aspects such as Open Space And Landscape Amenities, Land, Water, and Habitat Preservation.
But while governments are revamping cities for citizens, how affordable are these cities?
Egypt’s new administrative capital includes high-end compounds and gated communities, often unaffordable for the average citizen. Economic disparities are embedded in the government’s master plan, with nearby cities like “Badr,” situated 7 km from the NAC, tasked to address housing needs for low-income residents. The objective is to create a housing project providing around 30,000 units for those in the low-income bracket.
Tamer ElFiky, Partner and Head of Operations at Knight Frank’s Egypt MENA office, and Zeinab Adel, Head of Knight Frank’s MENA Egypt office, shed light on the challenges facing Egypt’s residential market. The primary obstacle is the prevalent inflationary pressures.
“Inflation reached about 36% in June this year due to a shortage of foreign currency and repeated currency devaluations. That is making property unaffordable for some buyers. Unsurprisingly, around 60% of current residential demand is focused on small apartments as buyers grapple with the soaring cost of living and rising interest rates,” they believe.
The NAC commands higher real estate prices, averaging $602 per sqm for apartments and $683 per sqm for villas, surpassing rates in many other areas of Cairo.
ElFiky and Adel compare city prices: ‘In 6th of October City’, an industrial hub in Greater Cairo, apartment rates averaged $258 per sqm, while villas stood at $559 per sqm in March this year.
In Nasr City, Cairo’s largest neighborhood, average apartment rates are $271 per sqm, while villas average $483 per sqm. El Sheikh Zayed City, known for its tranquility, features apartments priced at $427 per sqm and villas at $625 per sqm. In the heart of Cairo, El Zamalek surpasses the NAC with apartment rates reaching $772, thanks to its unparalleled connectivity with the city’s pulse, according to Aqarmap’s findings.
“Despite being very densely populated, Zamalek is still very popular among the affluent population because of its central location and Nile views,” ElFiky and Adel point out.
To provide context, the average salary for an Egyptian citizen is approximately $303 per month.
Despite the country’s economic challenges, the Egyptian government and developers are trying to enhance real estate accessibility.
Ayman Sami, Country Head at JLL, Egypt, explains that developers, mindful of these affordability challenges, are working to address them by providing extended payment schedules and downsized unit configurations.
He also commented on governmental efforts, stating, “The government has been actively pursuing developments that accommodate mid to low-income segments in the periphery of those new cities since all income groups need to live within proximity to each other to ensure that we have a well-balanced society and higher quality of life for all.”
Elfiky and Adel say developers increasingly offer smaller unit prices between $81,000 and $112,000.
“The Egyptian government has issued several decisions following in-depth discussions with industry stakeholders to mitigate the negative impact on the industry. The government is also focused on promoting real estate financing activities to help buyers and developers,” they add.
IN THE UAE?
Accessibility challenges extend beyond Egypt, echoing across the entire region.
Projections for Dubai’s real estate market anticipate a surge, with property prices expected to rise 15-18% in 2023 and an additional 5-7% in 2024.
There is a noticeable shift in buyer preferences towards off-plan purchases, with a substantial 13% year-on-year increase in the average purchase size, reaching AED 2.5 million. The average transaction price for off-plan properties in the city surged to $5,454 per square meter.
Liam Chase, Senior Developer Property Consultant at Allsopp & Allsopp, sheds light on the driving factors behind these price hikes. “The first launch in the area is the cheapest and they progressively increase the price as they launch further projects there. We are seeing that other developers are also increasing their prices, and more luxury projects come to the area, increasing the average price even further.”
Payment plans are becoming increasingly hostile, with a prevalent 70/30 breakdown (70% during construction, 30% on handover), notes Ayman Sami of JLL, Egypt. This trend favors investors with higher cash flow, while average citizens turn to smaller developers for better value and more manageable, mortgageable payment plans.
THE PLAN FOR QATAR?
In Qatar, the housing sector faces challenges as demand for residential properties declines, coinciding with an increase in supply linked to the construction boom associated with the FIFA World Cup 2022.
In a report, Faisal Durrani, Partner, the Head of Research at KnightFrank MENA, said, “The supply-demand imbalance, rising interest rates, and affordability challenges are contributing to a shrinking mortgage market and impacting the volume of home sales, while also undermining residential values.”
Durrani highlights a significant decline in rentals, anticipating heightened pressure on landlords to stay competitive. Knight Frank’s 2023 Destination Qatar report aligns with this, emphasizing that Lusail is a top choice solely among Qatari high-net-worth individuals for residential investments, with an average budget of $1.8 million.
ARE NEW CITIES REQUIRED?
Despite the affordability challenges, these emerging cities promise to tackle a spectrum of contemporary issues.
ElFiky and Adel emphasize, “In addition to providing better services to residents, lower traffic congestion and extensive green spaces and an environment that allows nature to thrive, they offer greater efficiency and use of resources are beneficial for the environment.”
Chase explains the impact of these new developments on urban centers like Dubai, stating that each innovative project sets a new benchmark in amenities and design.
“Consistently pushing the market forward to match or better what the competition offers. The main winners in all of this are the buyers and future residents of the building as they are now getting design-led homes with resort-style living for a fraction of the cost they would in other major cities around the world.”
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