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The real estate market in Cairo remained stable in Q2 2020 despite challenging conditions as government initiatives supported the sector, a recent report showed.
One residential project was completed in Q2 2020, while 35,000 units are currently under construction and expected to be completed in the second half of the year, real estate advisory firm JLL said in its Q2 Cairo real estate market report.
Egypt’s Ministry of Local Development suspended the issuance of construction permits for six months in Greater Cairo, Alexandria and other main cities. The decision helps to curb future supply within existing cities, the report said.
“The real estate market in Egypt continues to benefit from the various initiatives that have been put in place by the government across all sectors,” Ayman Sami, Country Head, JLL, Egypt said.
“We anticipate this to continue driving demand and attract international investments in the mid-to-long term,” he added.
Average sale prices in New Cairo dropped 6 percent year-on-year (yoy) during the quarter, while average rental rates rose 23 percent.
The Central Bank of Egypt (CBE) reduced interest rates by 3 percent to attract new developers and investors,
“Provided this remains in place as the economy recovers, the initiative is expected to attract developers and investors in the long term to finance their projects through bank loans rather than relying solely on off-plan sales,” JLL said.
Office market
Average prime rents in Cairo’s office market rose 7 percent y-o-y in Q2 2020 as the demand for primary office space continued to outpace demand for secondary spaces, the report said.
Average vacancy rates in Q2 2020 dropped to 11 percent mainly due to high levels of demand from online retail platforms.
“While no major incentives are being offered by landlords, the government continues to support the sectors most impacted by the pandemic. One such initiative is to allow corporates to pay their income tax in 3 installments (April – June), rather than just one in May,” the report said.
“The government has also increased the tax exemption limit from EGP 8,000 to EGP 15,000 for all employees, while increasing the annual income raise of public sector and state employees by 7% and 12 percent respectively,” it added.
Retail market
Average rental rates in primary and secondary malls have increased between 5 to 10 percent y-o-y.
With mall operations gradually getting back to normal, JLL expects average rental rates to remain stable with no major spikes in the second half of the year.
“The retail market has witnessed a noticeable shift in consumer preferences towards online shopping, allowing for a prominent number of home-grown F&B and fashion businesses to emerge, posing greater competition to shop owners who have not yet invested in an online shopping portal,” JLL said in its report.
Hospitality market
The hotel market saw significant declines in performance in Q2 2020 in light of travel restrictions according to the report.
Occupancy levels stood at 42 percent in the year to May 2020, the lowest since 2013.
“In a move to soften the impact on the hospitality sector and boost domestic tourism, the government has allowed hotels to reopen to local tourists and operate at 25 percent capacity in May 2020, provided they comply with strict precautionary guidelines,” the report said.
The government has committed part of the $2.7 billion emergency support loan granted by the International Monetary Fund (IMF) to the hospitality sector, in efforts to support the sector further,” it added.
(Reporting by Gerard Aoun; editing by Seban Scaria)
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