Egypt - Tarek Shoukry, head of the Real Estate Development Chamber at the Federation of Egyptian Industries and deputy of the housing committee in the House of Representatives, anticipates a marked escalation in property values. This comes in the wake of the Central Bank of Egypt’s move to hike interest rates by 6%.

In an interview with Daily News Egypt, Shoukry expressed that the rate increase is a double-edged sword: it’s expected to mitigate inflation and lower the cost of goods, benefiting the populace. However, the flip side presents a harsh reality for businesses and investors. The additional 6% on interest rates pushes borrowing costs to the brink of 30%, posing a daunting challenge for developers contemplating expansion or securing loans for ongoing projects.

Shoukry also highlighted that a free-floating exchange rate could significantly bolster investment stability and draw international capital into the domestic market. He forecasts that the forces of a free market will drive the dollar’s value below its present rate.

Echoing Shoukry’s sentiments, Abdallah Sallam, the top executive of Madinet Masr, concurred that neither a stable nor a depreciating dollar would trigger a downturn in Egypt’s real estate prices.

Sallam clarified that his firm consistently values properties based on the current cost of construction materials, ensuring that their pricing remains grounded and reflective of market conditions.

Ahmed Kadri, the chief of SAK Developments, shared a similar outlook. He acknowledged the recent dip in prices for key construction materials like steel, following the currency’s devaluation in the parallel market and the liberalization of the exchange rate. Moreover, the influx of Emirati investments into the Ras El Hekma project has been a boon.

Kadri emphasized the profound positive impact of the Ras El Hekma initiative on Egypt’s economy, instilling market equilibrium, alleviating the dollar crunch, and signaling the nation’s prowess in attracting direct foreign investments.

He projected a phase of price stabilization in the real estate sector, albeit temporary. The recent price surges, he noted, have not been matched by equivalent hikes in building material costs, leading some developers to halt sales. This has sown seeds of uncertainty, making it challenging for firms to set prices that align with anticipated rises.

Karim Abdeen, Hometown’s Chief Commercial Officer, also weighed in, stating unequivocally that the real estate sector’s fate is intertwined with currency fluctuations. He observed that the market has seen substantial price hikes due to rising construction expenses, as many building supplies are imported.

Abdeen disclosed that the property market has flourished lately, spurred by consumer demand driven by apprehension over potential price hikes and the public’s unwavering trust in real estate as a safeguard for their investments.

He dismissed the likelihood of a price drop in the property market, now or in the foreseeable future, attributing this stance to the soaring cost of steel. He noted that while some resale instances might see price reductions, these typically involve trimming excess rather than cutting into the core value of the properties.

Abdeen forecasts a period of market stabilization, followed by a surge in property prices. This is attributed to a significant customer base deferring their purchasing decisions until the economic climate and exchange rates reach equilibrium. Consequently, an uptick in demand is anticipated, potentially driving prices upward.

Alaa Fekry, the vice-chair of the Real Estate Development Committee at the Egyptian Businessmen’s Association and the head of Beta Egypt, believes that the liberalization of the exchange rate coupled with increased interest rates will not permanently stall the upward trend in property prices. Instead, it is likely to enhance the dollar reserves of property developers.

Fekry acknowledges the possibility of a short-term adverse effect on the property sector due to the hike in interest rates, which may tempt customers to opt for bank certificates offering returns as high as 30%. However, he maintains that this effect will be ephemeral, citing historical data that underscores real estate as the most secure and lucrative investment.

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