10 Reasons Why Now’s The Perfect Time to Buy Property in Egypt
Updated: Feb 18, 2020
If you have always dreamed of having your own place in Egypt’s beautiful sunny weather, 2018 could be your year. Whether you are after an investment property or a holiday home, it is worth giving Egypt’s booming property market some thought. To help with this, we explain why you should seriously consider Egypt for your next new home purchase.
1. Geographically strategic location.
With easy air access just a few hours away from Europe, Egypt is a popular destination for holiday and retirement home buyers. Temperatures range from 15°C in winter to 30°C in summer creating a perfect year-round destination to own a home in Egypt’s beautiful weather. In addition, due to the low cost of living and the significantly cheaper cost of luxury property compared to similar properties elsewhere, it is no surprise that many foreign pensioners permanently live in established red sea destinations like El Gouna. Others buy homes to spend their winter holidays in Egypt and rent out their property for the rest of the year.
2. Unique tourist potential.
Egypt is the one of the world’s fastest-growing tourist destinations according to the latest 2017 report from the United Nations World Tourism Organisation. The downing of a Russian plane in 2015 followed by a ban on flights to Sharm El-Sheikh from both the UK and Russia deterred many from visiting Egypt. Nonetheless, this did not stop 5.26 million holiday makers from visiting in 2016 (51% increase). International tourist arrivals continued to increase in 2017 with hopes that 2018 will be a year of further recovery for the Egyptian tourism sector once the UK and Russia resume their flights to Sharm El-Sheikh.
3. Attractive Middle Eastern market for Foreign Direct Investment (FDI).
Egypt has attractive energy resources; the recent discovery of a huge natural offshore gas deposit in Egyptian waters (believed to be the largest in the Mediterranean) will enable Egypt to become a major regional gas exporter. The Egyptian economy also benefits from a large domestic market and a low cost relatively qualified workforce. In the last few years, Egyptian authorities have undertaken several successful reforms improving appeal to foreign investors. FDI increased from $4.3 billion in 2014 to $8.1 billion in 2016. Egypt’s central bank reported a 14.5% rise in FDI in the 2016-2017 fiscal year which ended on 30 June 2017. The UNCTAD 2017 World Investment Report ranks Egypt as one of the top five FDI destinations in Africa. The UK is the largest investor contributing 47% to Egypt’s FDI in 2014-2015. In 2016, Egypt signed a memorandum of understanding with China, which included $15 billion in Chinese investment to undertake a number of projects including the establishment of an economic area in the Suez Canal Zone and investments in maritime and land transport facilities. Egypt also benefits from abundant liquidity coming from the Gulf countries.
4. Growing population with a high demand for housing.
As of 2018 the official population clock recorded 96.3 million making Egypt Africa’s second most populous country after Nigeria and ranking 13thworldwide. Egypt’s Ministry for Housing estimates that 200,000 new homes need to be built every year for the next five years to cater to the housing shortage in the face of the country’s rapidly growing population. With approximately one million marriages happening every year, the demand for new housing from middle and upper classes is in the order of 80,000 units a year. For these reasons, Egypt’s real estate market has witnessed a recent increase in the number of private property developers capitalising on this growing demand.
5. Egyptians expats; a strong purchasing power.
It is estimated that just under 10 million Egyptians live abroad; over half of which live in the gulf countries (e.g. Saudi Arabia, Kuwait and UAE). Egyptian expats send back billions of dollars every year in remittances which constitutes an important source of foreign currency for the country. The majority invest in real estate to ensure the value of their hard earned savings does not depreciate in particular after the flotation of the Egyptian pound in November 2016. Egyptian expats benefited the most from the currency devaluation as they saw the purchasing power of their savings double. This encouraged an increase in new home purchases made by Egyptians living abroad. Property has long been seen by Egyptians as a safety haven for their savings and will continue to retain its appeal.
6. Egypt’s off-plan market is booming.
Historically, Egyptians have always bought key-ready new build homes which would involve paying the full price upfront. In recent years the concept of buying off-plan has become quite popular. Buying off-plan means purchasing a property before construction is complete. This enabled many Egyptians to become home owners as they could not afford to pay the full price of a property upfront. A large number of financially strong developers have generous payment plans for their projects. Following the removal of the dollar peg in November 2016, and the subsequent increase in construction costs and unit prices, developers increased the duration of interest-free payment plans from 4 years up to 6 and 7 years. A few developers are able to offer 10-year payment plans. In the face of inflation and the high cost of property, more home buyers prefer to buy property at a higher price from developers which are able to offer these flexible long-term payment plans.
7. Luxury property in Egypt is cheaper than what you may think.
There is a strong competition between Egypt’s top real estate companies to master-plan world-class property developments that will attract home buyers. The majority of these residential complexes are designed by international architects ensuring a premium quality real estate product. When compared to similar properties elsewhere, the cost of luxury property in Egypt is 25-40% cheaper. Property developers also recognise that not many people have a large deposit saved and so companies are coming up with down payments as low as 5% to get would-be buyers a foot on the property ladder.
8. Reputable developers continue to invest in Egypt’s resilient property market.
Big real estate players continue to acquire land from the Egyptian government to increase their land portfolio. In early 2017, Egypt’s largest real estate developer Talaat Mostafa bought a 500-acre land plot in Egypt’s new administrative capital for $243.77 million to develop a fully integrated urban project similar to its previous well known projects El Rehab and Madinaty. Mohamed Alabbar, the Emirati founderof Emaar Properties, one of the largest real estate companies in the world, expressed interestto invest in a number of projects in Egypt’s new administrative capital and the New El Alamein city. In September 2017, Palm Hills Developments andthe Egyptian New Urban Communities Authority (NUCA) inked an agreement to co-develop, on a revenue sharing basis, an integrated residential community spreading over 3,000 acres in west Cairo which would provide 40,000 residential units. This new model of offering land to private developers will allow the government to generate revenue from public lands whilst facilitating the process of land acquisition for private developers.
9. Benefit from low taxation in Egypt.
There are no stamp duty or capital gains taxes in Egypt. When selling real estate, a flat rate of 2.5%of the gross proceeds is levied. The majority of real property in Egypt is subject to tax at a rate of 10% on the annual rental value (regardless of whether the property is actually leased out or not) after allowing a 30% deduction from the rental value to cover maintenance expenses. Rental income is taxed at the standard income tax rates. Taxable income is gross rent less expenses.
10. Egypt is building a new capital city, roughly the size of Singapore.
The mega city which aims to ease the concentration of the population in overcrowded Cairo was heavily criticised when it was first announced in 2015, but there has been some impressive progress on the ground. With construction of the first phase well underway, government ministries are to move to the new city by the end of 2018. Shanghai based developer China Fortune Land Development signed a deal last year with Egyptian authorities to build a Central Business District in Egypt’s new administrative capital at a cost of $20 billion. The development, which will include 12 business complexes, five residential buildings, two hotels and a 345-meter high skyscraper (the tallest in Africa), will take place in the second phase of construction to be completed within the next three and a half years. Experts predict that new property developments in the new capital are set to lead the future of Egypt's real estate market.
New Administrative Captial