In an interview with Daily News Egypt, Mansoor Ahmed, Colliers International’s director for development solutions, healthcare, education, and public private partnership (PPP) in the Middle East and North Africa, said that Egypt is witnessing growing investment in the second home market as it is cheaper than other areas in Europe and the US in light of the currency devaluation.
Can you arrange the most areas in Egypt in demand for second home?
The first important thing is who is buying these second home units. 90% of people who buy these units are married and have children. In a survey conducted a couple of months ago, it was revealed that the amount of money paid for the unit is decided by the husband, but the wife decides where to buy it. The survey also showed that 98% of people who buy second homes are Egyptians.
The most popular now is Ain Sokhna because it costs roughly 30% less than the North Coast. Additionally, Ain Sokhna is close to Cairo, as it only takes two hours to get there. 54% of people buy in Ain Sokhna, 38% buy at the North Coast, 4% buy in Ras Sidr, and 4% buy in other places. Therefore, people are now turning to use Ain Sokhna as a permanent home because of the availability of education services, like schools, besides health services.
Furthermore, Sharm El-Sheikh is also in demand as the area used to rely on international tourism. But because of the current situation, the international tourism is becoming less than before so prices went down so most people going to Sharm El-Sheikh are Egyptians.
We expect that international tourism will rise again because of the appreciation of the dollar against the Egyptian pound. The international tourism is expected to gradually improve, but it will not resume overnight. But after about a year and a half, a lot of international tourism will start coming from Europe.
How does the devaluation of EGP affect the second home market?
I believe that the devaluation could have a positive impact on international tourism, which will definitely have a positive impact on the second home market.
Holiday homes in Egypt, with the exception of El Gouna, remain relatively affordable compared to other popular vacation home markets studied by Colliers.
For example, El Gouna is less than half as expensive as Mauritius, Cyprus, and the Seychelles.
We believe that within one year, more and more people will come to invest in Egypt. However, the second home market is primarily for Egyptians, as only 2% of customers are foreigners, and we don’t expect that this percentage will change. Thus, developers should know the Egyptians’ needs regarding second home units.
Why do you expect that the percent of foreign clients will not change?
One of the restrictions is that foreigners cannot sell or rent their units before five years have passed. Additionally, they cannot buy more than two homes, with the cumulative maximum area being 4,000sqm. If property ownership is obtained through a court verdict, the process can take six to eight months.
What is the size of the second home supply?
Over the past 11 years, the number of vacation homes has increased by approximately 90%, reaching approximately 65,000 units by the end of 2016. Furthermore, a lot of supply is coming to the market, as another 65,000 units are to be delivered during the next five years.
The most popular hotspots for vacation homes are the Red Sea, South Sinai, the North Coast, and Ain Sokhna. While Ain Sokhna, the North Coast, and the Red Sea have always been popular, South Sinai has the most vacation homes under construction.
How can the second home market be improved?
People come to spend school vacation in their second homes in the mentioned areas due to a lack of educational services. We have observed that in Europe, the US, and Asia the second home market is supplied with healthcare and educational services. Nevertheless, Egyptian second home areas need to be connected with these services based on the fact that Egyptians spend a lot of money on education. International schools can be opened in the second home areas to include the children of people who have units in these areas as parents who work in the capital can see their children every one or two months.
Moreover, there is a positive thing that happened last year: at least five top school operators from the US and the UK want to invest in Egypt.
Do you think that the New Administrative Capital will increase demand on the second home market?
I think as the New Administrative Capital is being developed, it will have a positive impact on this market, especially in Ain Sokhna and then the North Coast. I expect that the development of the New Administrative Capital will turn Ain Sokhna to widely become a first home for Egyptians.
Do you think that the market will witness saturation in second home units during the coming five years?
No, I think during the coming five years, there will be a lot of demand. As population is growing—the Egyptian population increases by 2.5% annually—the demand will increase.
The demand doubled in five years, and we don’t expect that demand will go down, but rather that within the next five years the demand will double. However, the increase of demand for example may drop to 10% per year instead of 20% as it will gradually slow down.
Saturation may be reached for chalets and big units, but the demand is still high on one bedroom or two bedrooms units, so the developers have to diversify their products to avoid saturation and target a wider market.
What is your expectation regarding the prices in the second home market during the currency fluctuations?
Prices may go up by 30% but not more, because Egypt started to produce building materials, reducing dependence on imports; therefore, prices will stabilise. However, prices for Cairo will increase by 20%.
People buy second homes as investments to face currency fluctuations as a safe haven and often intend to sell it after prices go up.
Can you estimate the percentage of customers to whom second homes are just an investment opportunity?
I think the percentage of people who buy for investment purposes is 30% to 40%.
What kind of real estate at the New Administrative Capital will witness the biggest demand?
At the New Administrative Capital, there will be everything—more offices, administrative offices, residential units, schools, and hospitals, since lands at the New Administrative Capital will be cheaper than other areas, for example the Fifth Settlement.