2011 is a lost year for the real estate sector, Nesma Nowar reports The events of the 25 January Revolution have significantly impacted Egypt's economy and consequently the country's real estate sector. Even summer, often the peak season for the sector, failed to brighten up the situation. With the advent of summer, demand for property in certain areas outside Cairo, such as the Northern Coast usually increased. The Northern Coast stretches 525 kilometres on the Mediterranean east to Salloum on the Libyan boarder. Hundreds of summer resorts stretch along the coast. But this year, things are different. Ayman Sami, head of Egypt Office, Jones Lang LaSalle, the financial and professional services firm specialising in real estate, told Al-Ahram Weekly that unlike previous years, 2011 did not witness any significant demand. He attributed this to the fact that this year, summer is very short because the month of Ramadan starts on 1 August and people are focussing on their basic housing needs instead. "People are now afraid to buy in the distant areas, in addition to the halt of several developments there due to the uncertainty," Sami said. Nehad Adel, vice president of Coldwell Banker Egypt, an international real estate agent, agrees with Sami that demand for property in the North Coast is low. He explained that the "second home' is always the first thing that is affected by any crises or recession. That is why demand decreased in places like the North Coast as well as Ain Al-Sokhna, another vacation destination for Egyptians. Adel believes the shorter summer is also a major factor. He stated that in the last couple of years, demand in the North Coast decreased due to the fall of the holy month of Ramadan in the summer. "That is why people preferred leasing rather than buying," he explained. This year, Adel said, people have resorted to leasing in the North Coast. He added that people could easily find units to rent there, as there is an oversupply due to weak demand. Regarding Ain Al-Sokhna, Adel pointed out that the demand season there is different from the North Coast. Usually, the demand season in Ain Al-Sokhna ends in May and June, however, it did not escape the brunt of the weak demand either. As for Cairo, Adel said that after the revolution, there was a slowdown in the real estate activity especially for the off-plan property, or property which is still under construction. He stated that off-plan sales dropped because people, after the revolution, do not prefer buying property in residential compounds that are still under construction and which they would receive after two or three years. They would rather buy property which already exits. "People who have urgency to buy, they buy on-plan property," he said. But low summer demand is only a reflection of the general status of the sector which is currently blighted by legal issues over land ownership. Several real estate developers such as Palm Hills and Talaat Mustafa were facing legal challenges to their land holdings after accusations of acquiring the land through illegal direct land allocation. "We consider 2011 a lost year for the real estate market due to the ongoing political turmoil," Ayman Sami of Jones Lang LaSalle told the Weekly. Sami explained that in the first quarter of 2011, people were hesitant over buying because of the political unrest which meant a slowdown in the sector. However, he said he expects that things would get better on the medium and long term because Egypt's economic fundamentals are very strong. "Egypt's fast growing population constitutes a strong driver for real estate demand," he affirmed. Real estate developers that focussed on high end property for Egypt's wealthy elite have been affected most, noted Sami. However, he said that medium and low housing projects have not been affected as much. "There is still real demand as people want to get married and buy houses." Adel is optimistic that 2012 could be a booming year for the real estate market once political stability and order are restored. He added that over the coming period, more investors would come and invest in the Egyptian real estate market. Egypt's real estate market has the potential to be thriving, Adel added, because of the fast growing population and the high purchasing power of Egyptians who consider real estate as secured investment. However, he pointed out that many real estate developers are hampered by political risk and corruption represented in complicated procedures and regulations. "By eliminating those two discouraging factors in post-revolution Egypt, the real estate market would attract more investments," he said. According to Sami, it is not yet clear when exactly the real estate sector would recover. Nonetheless, he affirmed that the rebound depends on political stability in the first place, and the resolution of the current disputes over the state's land ownership. A report entitled Revolution and Real Estate, published by Jones Lang LaSalle, finds that 2011 represents something of a lost year with decisions to lease or purchase real estate delayed until the "dust settles" and greater certainty returns to the market after the elections later in the year. It stated that although the strong long-term fundamentals for residential demand remain unchanged, sales transaction volumes declined sharply and will remain low on the short term. This is primarily driven by uncertainty resulting from new legal measures introduced to control corruption and improve financial accountability between developers and the previous administration. The report further anticipated that affordable housing in Cairo and other Egyptian cities, which was a major concern voiced by protesters, would be addressed over the coming period. An early indicator of the new priorities is the announced plans to build one million affordable homes in 22 cities across Egypt.
