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Building material prices expected to increase: experts Increase in US dollar exchange rate led to 22% rise in construction costs, directly affects residential unit prices, says expert
Experts expect an increase in real estate prices in Egypt during the coming period, given the rising prices of construction materials, according to Ahmed Abdel Hamid, chairperson of the Building Materials Chamber at the Federation of Egyptian Industries (FEI). Abdel Hamid said that the increasing activity in the real estate sector in Egypt, especially in the second half of 2016, resulted in a remarkable rise in real estate prices, given the high price of construction materials. Abdel Hamid attributed the increase to the US dollar exchange rate in Egypt, which is expected to rise against the Egyptian pound again during the coming period. Following the devaluation of the Egyptian pound, the US dollar price in the Central Bank of Egypt (CBE) recorded EGP 8.78, while the informal market stood at EGP 11.10. Abdel Hamid added that the increase in real estate prices has a positive effect when looked at from an investor's point of view. He explained that it reduces the cost of investment for foreign investors and stimulates the ownership of properties in Egypt. Ahmed Al-Zainy, head of the Building Materials Division at the Federation of Egyptian Chambers of Commerce (FEDCOC) said that steel prices would go up in the coming period, if energy subsidies for steel factories are lifted. Al-Zainy added that low-income citizens will be most affected by these increases, if energy prices increase. He called for the need to offer new licences for steel factories to increase production and competition, which would help in bringing prices down. Steel prices in the markets had stabilised to a large extent, as Ezz Steel stood at EGP 5,450 per tonne, while Egyptian Steel recorded EGP 5,000 per tonne, and El Attal Steel EGP 5,425 per tonne. Real estate expert Ali Azzam said that the increase in the US dollar value against the Egyptian pound reflected negatively on the real estate market, and led to higher prices for building materials, such as steel and cement. He added that this led to a 22% increase in production costs, which directly reflects onto the price of residential units. He claimed that the inflation rate went up to 33%, unlike what the government has been promoting. Azzam added that this negatively affects various economic sectors and reduces the purchasing power of citizens.
