The decision to float the Egyptian pound has resulted in a multifaceted impact on the country’s real estate market.

1. SPOTLIGHT ON THE REAL ESTATE CONSEQUENCE OF
FLOATING THE EGYPTIAN POUND
DR. EHSAN BAYAT

2. SPOTLIGHT ON THE REAL ESTATE CONSEQUENCE OF FLOATING THE
EGYPTIAN POUND
 In November 2016, a decision was made to float the Egyptian pound. This decision has had major
consequences for the country and its economy. One of the industries with the greatest impact has been
real estate development.
 According to some estimates, the cost of construction in Egypt has nearly doubled since the Egyptian
pound was floated. Industry experts predict that general real estate prices will continue to increase as a
result. In the first quarter of next year, real estate prices will likely increase up to 30 percent on top of the
30 to 40 percent increase already seen in the country.

3. STRATEGIES TO CONTROL INCREASING REAL ESTATE PRICES
 Unfortunately, few options exist for controlling this price hike. The state could play a role in decreasing
prices by lowering the cost of land that it provides to developers and other companies. In addition, the
state could increase the overall supply of land to help counter increasing expenses associated with steel
and cement for construction projects. The other solution is simply time. Property prices align with the
degree of inflation that occurred after the pound was floated, and this inflation is still in the process of
settling.
 A director at Colliers International Middle East and North Africa noted that average rate of inflation
should decrease by about 20 percent in 2018, so property prices may see more modest increases than
predicted by other market experts. At the same time, this director estimated an additional property price
increase of between 15 and 22 percent over the course of the year. However, other major players in this
industry point out that land prices will likely continue to increase despite drops in inflation, so average
real estate prices may increase even more to account for this new expense.

4. FOREIGN INVESTORS IN THE EGYPTIAN REAL ESTATE MARKET
 One of the other consequences of floating the Egyptian pound is increased interest in Egypt among
foreign investors. Because the value of the pound went down relative to other currencies, the amount of
foreign investment in Egyptian real estate increased significantly.
 Some real estate developers in Egypt have called for greater regulation of foreign investment to ensure
that Egyptian citizens have the opportunity to own units in the future. However, the flip side of this coin
is attracting Egyptian expats back to their home country. Egyptians living and working abroad are now in
a better position to purchase property in Egypt, and participating in foreign exhibitions could bring new
business to the country.

5. PRICE FLUCTUATIONS VARY BY CURRENCY
 The flotation caused prices to fluctuate quite dramatically between different currencies. For example,
average prices in American dollars decreased by nearly 50 percent at first and are still about 40 percent
cheaper than they were before flotation. For about $100,000, individuals can purchase luxury units in
some of the most desirable pats of Cairo. In the same timeframe, costs for locals actually increased 30
percent. This makes it harder than ever for Egyptian citizens to afford quality housing.
 Many of the foreign investors in Egyptian real estate come from Saudi Arabia. These individuals can
purchase high quality housing units at relatively low prices. Because Egypt is a common vacation
destination for Saudis, many people jumped at the opportunity to have a second home in the country.
The problem is that these purchases, which include properties in Cairo, Sharm El-Sheikh, and Ain Sokhna,
limit the real estate available for Egyptian nationals.

6. REACTIONARY REAL ESTATE DEVELOPER BEHAVIOR IN EGYPT
 The flotation of the Egyptian pound has also fundamentally altered the ways in which developers in the
country approach their work. Despite higher prices in the real estate market, demand is also growing, largely
driven by foreign investment. Developers need more effective strategies for managing growing costs of raw
materials and the higher prices for land.
 Competition between developers is stiff, with everyone scrambling to attract new customers. One of the
consequences of this scrambling may actually be more partnerships among developers. This could help
overcome some of the cost issues and maximize profits.
 Partnership may become more important with new policies about land purchases likely to be implemented
soon. Land in Egypt is sold by auction, and increased demand has continued to drive prices. However, nothing
stops developers from aiming too high and bidding outside of their means. Proposed regulations would
classify developers by track record and demonstrated ability so that they can only bid on appropriate plots of
land. Companies may join forces to garner the sway needed to qualify for the most desirable plots.

7. EXPANDING MARKET ACCESS WITH A MORTGAGE SYSTEM
 The Egyptian mortgage system may also receive a bit of an overhaul to make home ownership a
possibility for larger segments of the population. Because no formal mortgage financing sector exists,
the developer often becomes the financier through off-plan sales. However, these deals involve
considerable risk and can still exclude families of lesser means. The main obstacle for a mortgage finance
system is the current inflationary environment, which would result in high interest rates.