Improved economy and political stability boost Cairo property markets
All sectors of the Cairo real estate market have witnessed a positive performance and improved sentiment during the first three months of 2015 due to stronger confidence and investment appetite created by increased economic and political stability.
A new analysis from international real estate firm JLL says that this confidence is most clearly illustrated by the recent announcement of the mega real estate project Cairo Capital which will serve as an extension for New Cairo and will draw the centre of gravity further to the East of the existing city.
The report shows that residential sale prices have continued to increase across Cairo in the first quarter of the year with office rents increasing in New Cairo and retail rents edging further upwards over the past quarter. The hotel sector has also recorded improved performance with tourist numbers and hotel occupancy rates improving.
The performance of both the tourism sector and other parts of the real estate market are expected to continue to benefit from increased levels of foreign investment into Egypt, committed at the recent Economic Summit in Sharma El Sheikh in March 2015.
The report points out that Cairo’s residential market continues to recover with improved sales figures as a result of the recovering economic and political sentiment. Apartment and villa sale prices increased during 2015 across all the areas monitored by JLL as many residential developments have few units left and have increased prices accordingly.
Performance in the rental sector remains more mixed, with some properties experiencing an increase while others are experiencing a reduction due to the unstructured nature of the rentals market in Egypt. An extra 31,000 units are planned to be delivered during 2015 of which 11,000 are in New Cairo and 19,000 are in the 6th of October.
‘The positive economic outlook arising from the Economic Summit is expected to result in additional investment in the residential sector, strengthening the market further in 2015,’ the report says.
During the first quarter of the year some 250 units were completed in Al Rehab City, New Cairo, in addition to 640 units in the Zayed complex, increasing the current supply to around 106,000 units. A further 31 residential developments are expected to complete in the rest of 2015 ten of which will be in the second quarter, adding an extra 30,000 units to the current supply.
The report points out that the Palm Hills Development is notable, with five of their developments planned to be delivered in the second quarter alone. ‘Despite this additional supply, the positive sentiment is expected to result in increased selling prices over the coming year,’ it adds.
Cairo’s office market witnessed a slight improvement during the first quarter of 2015 as rental rates increased significantly in New Cairo due to relatively higher demand. Rental rates in Central Cairo and West Cairo remained unchanged.
The major completion in the first quarter of2015 was Park Avenue located on the Cairo Alexandria Desert Road. This 15,000 square meter development is currently complete but not yet operational.
The report also shows that the vacancy rate has decreased by 2% since the fourth quarter of 2014, signalling stronger demand for commercial space. The year on year increase in vacancy rate is mainly due to the influx of more than 100,000 square meters throughout the year, it adds.
Cairo’s office supply is expected to expand further in 2015, with an additional 37,000 square meters being delivered of which 17,000 square meters is due for delivery in the second quarter of the year. The supply of office space is, however, generally lower than in previous years.
The demand for office space is now equally balanced between Sectors One and Two within New Cairo. Sector two benefits from higher parking availability, new supply and competitive pricing. This high demand is inducing developers to raise the asking price, the report adds.