Real es­tate prices re­flect in­fla­tion: Col­liers In­ter­na­tional

The Daily News Egypt - - Business - By Shaimaa Al-Aees

Real es­tate prices will still go up due to the in­fla­tion that came as a re­sult of the cur­rency de­val­u­a­tion, ac­cord­ing to Re­gional Di­rec­tor at Col­liers In­ter­na­tional Mid­dle East and North Africa Ian Al­bert.

Col­liers In­ter­na­tional is a global com­mer­cial real es­tate com­pany.

In an in­ter­view with Daily News Egypt, Al­bert said that the there is a de­mand for high qual­ity class A of­fice spa­ces projects.

How do you eval­u­ate the de­mand on the real es­tate sec­tor? In ad­di­tion, which sec­tor is more im­por­tant?

The base­line is that the de­mand on the real es­tate sec­tor is al­ways strong and is the top of ev­ery­thing and sup­ported by very strong de­mo­graph­ics, much pop­u­la­tion means lots of de­mand on many sec­tors.

With the cur­rent econ­omy, some sec­tors ob­vi­ously per­form bet­ter than oth­ers. The real es­tate sec­tor is still strong, fur­ther, ad­min­is­tra­tive of­fices with high stan­dards of qual­ity is still stronger than oth­ers.

Re­tail in terms of de­mand on shop­ping malls dropped be­cause of the in­fla­tion sit­u­a­tion; how­ever, com­mu­nity re­tail (small size of shops) is a very small scale and its mar­ket is small.

In the past two years, hospi­tal­ity went up.The good news is that the tourism is re­turn­ing back in Sharm El-Sheikh and North Coast.

Fur­ther­more, there are some ser­vices re­lated to real es­tate, such as ed­u­ca­tion and health­care. In other words, hos­pi­tal schools and uni­ver­si­ties are real es­tate in­vest­ments, as these strong de­mo­graph­ics need such ser­vices.

Which ar­eas are more de­mand for sec­ond home mar­ket?

Hurghada and Ain Sokhna are the most in de­mand.

What is your ex­pec­ta­tions to the real es­tate prices in the com­ing pe­riod?

We are hop­ing the in­crease in real es­tate prices will slow down. How­ever, I think that price will still go up due to the in­fla­tion that hap­pened as a re­sult of the de­val­u­a­tion of the lo­cal cur­rency.

Eleven months have passed since the pound flota­tion, and we are still in the phase of set­tling down. Prop­erty prices match the in­fla­tion. For ex­am­ple, if in­fla­tion drops down be­tween 12% to 15% in 2018 and 2019, we ex­pect real es­tate prices to match that as well.

Since the pound flota­tion, prices in­creased by 30%. If in­fla­tion is down by 50%, the in­creases in prices will de­crease by 50%.

For the next year, prop­erty prices would in­crease only by 15-22% be­cause av­er­age in­fla­tion should de­crease to 20%.

Do you think that the real es­tate sec­tor is ap­proach­ing a bub­ble?

No, prop­erty prices re­flect in­fla­tion, which is why con­struc­tion costs in­creased. The pound value went down, in­fla­tion went up by 30%, and prop­erty cri­sis in­creased by 30%.The real es­tate sec­tor is a mir­ror that re­flects the state of in­fla­tion.

What are the most promis­ing parts of real es­tate sec­tor, whether res­i­den­tial, com­mer­cial, or re­tail?

We still see a lot of de­mand for class A of­fice space in the 6th of Oc­to­ber mainly. We are go­ing to see a de­vel­op­ment in ed­u­ca­tion and health­care com­ing in as very strong as the real es­tate sec­tor and com­mu­nity re­tail.

Do you think we have a short­age in ad­min­is­tra­tive build­ings and of­fices?

Yes, Egypt has a short­age in high­qual­ity of­fice spa­ces.We also have a short­age in com­mu­nity re­tails.

Re­cently, there has been a high in­fla­tion rate. How do you ex­plain the high de­mand on the sec­ond home mar­ket?

The sec­ond home mar­ket is con­sid­ered a safe in­vest­ment, as in the Mid­dle East area peo­ple like in­vest in the real es­tate.

How do you eval­u­ate Egypt’s real es­tate prices in com­par­i­son to other coun­tries?

The prices in Egypt al­ways hike due to the grow­ing pop­u­la­tion, which is higher than all the coun­tries in the re­gion.

Do you think the EGP de­val­u­a­tion will in­crease the real es­tate pur­chas­ing of for­eign­ers or Egyp­tian ex­pats?

For Egyp­tian ex­pats, the an­swer is yes be­cause we see more of them buy­ing homes af­ter the dol­lar ap­pre­ci­a­tion. How­ever, for for­eign­ers, it is still dif­fi­cult be­cause of lo­cal reg­u­la­tions.

Nev­er­the­less, the cab­i­net ap­proved a tem­po­rary stay or res­i­dence to the for­eign­ers who buy prop­er­ties be­tween $100,000 and $400,000 for about 5 years and one year. Do you think this can help in in­creas­ing for­eign pur­chases?

Well, I think it de­pends on where the money comes from. I think if you are of­fer­ing that to Libyans or Ye­me­nis, it could work be­cause they will find a place to live. But most Euro­peans don’t need res­i­dency.

In your opin­ion, what is a way to pro­mote the sec­tor to at­tract more dol­lars?

I think the res­i­dency de­ci­sion is a good step for many peo­ple whose coun­tries do not have the same po­lit­i­cal sta­bil­ity like Egypt. There are some as­pects that hin­der for­eign in­vest­ments, such as se­cu­rity and in­fla­tion.

Re­gard­ing the tourism sec­tor, what is your ex­pec­ta­tion to the sec­tor’s growth, and which ar­eas are the fastest in growth?

The sec­tor is re­cov­er­ing. I think “con­fer­ence tourism” and tourism in gen­eral are im­prov­ing. The prob­lem with Egypt is that ev­ery time a boost in tourism oc­curs, ac­ci­dents hap­pen. Cairo and the North Coast are wit­ness­ing a flow of Gulf tourists, but Sharm El-Sheikh will re­gain its pres­tige and tourism grad­u­ally.

Do you think the in­crease in in­ter­est rates in banks will af­fect the sec­tor?

In­vest­ing in the real es­tate mar­ket in Egypt is very good be­cause in­ter­est rates are very strong.The is­sue is: for how long will this rate be sus­tain­able, as it puts pres­sure on the lo­cal mar­ket in terms of bor­row­ing? It has two sides: it brings for­eign di­rect in­vest­ments (FDIs), but it re­duces the ap­petite of the lo­cal mar­ket.

How do you see the de­val­u­a­tion and its ef­fect on the real es­tate mar­ket?

I think it is good for the sec­tor. It hurts in the short term, but in the long run, I think it is the best thing to do.

What are the chal­lenges in the sec­tor?

The big chal­lenge is the in­fla­tion. Fur­ther­more, the mar­ket needs ac­cess to af­ford­able land and fi­nance and sta­ble con­struc­tion costs. The lat­ter de­pends on the in­fla­tion rate. Be­sides, there are ef­forts to pro­vide land, but fi­nance is still dif­fi­cult at the mo­ment, as there is a need for re­tail fi­nance to pro­mote the mort­gage sys­tem in Egypt.

HURGHADA AND AIN SOKHNA ARE THE MOST IN DE­MAND FOR SEC­OND HOMES SINCE THE FLOTA­TION

Do you think the gov­ern­ment rep­re­sented in the Min­istry of Hous­ing acts as a com­peti­tor to real es­tate com­pa­nies?

The gov­ern­ment is de­vel­op­ing lowend projects with low-profit mar­gins for spe­cific seg­ments or tranches of the com­mu­nity that are not cov­ered by real es­tate com­pa­nies.

Ian Al­bert, the re­gional di­rec­tor at Col­liers In­ter­na­tional Mid­dle East and North Africa

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