Dubai: Egypt’s 38 per cent devaluation of its currency last March is definitely helping cool down its real estate sector. And that’s something the property market was in need of, according to a top developer.
“There was a bit of frenzy going on before the pound’s devaluation,” said Mohamed Amer, CEO of El Gouna, an upscale community project that is part of the Orascom Development network. “Some of the buying activity was understandable, because property is seen as a store of value. Even then, there was an unusual type of surge happening earlier, and something the Egypt’s real estate sector would have found hard to sustain.”
In March, the devaluation move kicked in, but the decision was widely anticipated by investors in the North African market. The actual extent of the devaluation – at 38 per cent – might have caught some of them by surprise.
It’s still early days from the government’s move, and various sectors are still filtering the effects from it. As for property, “We are back to ‘normal’ supply and demand,” said Amer. “What I mean by that is demand is still quite strong. There is nothing like a total absence of demand.
“The current situation provides clarity for developers – in our case, prior to the devaluation, our cost base was not very clear amidst all that speculation. Also, it was difficult when it comes to importing raw materials for the projects. We had situations where raw material prices were changing almost on a daily basis.
“What we are seeing now is a whole lot of stability.”
Amer’s sentiments hew close to what other developer and real estate sources have been saying about the Egypt real estate situation after the changes on the currency value. Recently, a top official at Aldar, which is a major shareholder in the Egyptian luxury developer SODIC, said hedging was being done both on the project side and on the sales to factor in the devaluation.
On the demand side, buyer profiles for recent property launches in Egypt include the Egyptian diaspora, those from the GCC and other Middle East economies, and a growing base of first-time investors from Europe.
Helping set the pricing
Amer says that setting property prices too have become easier and more transparent once the devaluation clocked in. “Earlier, when pricing real estate, you had to assume a certain level of inflation and other contingencies, and those levels were pretty high,” he added. “It’s gone back to normal now and reflected in the final price for the property buyer.
“So, even if there is a drop in investor activity post-devaluation, it’s going to be temporary. When that demand returns, it’s going to be real demand that shows up.”
Orascom Development has been trying to get a sense of that demand, holding a roadshow in the UAE recently and then onto Saudi Arabia and elsewhere. There is also a trip to the US. Apart from El Gouna, it has the O West and Makadi Heights.
“At El Gouna, 40 per cent of our residents to date are non-Egyptians,” said Amer. “There is a lot of demand for Egyptian properties from GCC nationals. We see it happening in the North Coast projects, and also seeing demand shift towards first homes in Cairo and also in the Red Sea.”
On whether the developer would consider delaying new launches until the market dynamics become more clear, Amer said: “Not so. We are planning a big launch soon, and it will be one of the biggest we have had. The plans related to new developments remain the same, whatever the situation on the devaluation.
“The fundamental demand for property investments in Egypt remains intact. That means we are not going to make any changes to our plans.”
