Feature: Egyptian real estate market yet to recover after unrest

13:57, May 12, 2011      

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by Marwa Kareem

Egypt's real estate market seems to need more time to recover from the impact of protests that erupted on Jan. 25 as buyers wait for the house prices to continue to fall.

"I could not take any step to buy a new, larger one. All my friends advised me to wait as the prices will be reduced more in the coming period," said Ameriah Mahmoud, a 38-year-old housewife who lives with her family in a small flat in Cairo.

"I want to manage my own savings in the right direction," she said.

Hussein Gomaa, chief of the Real Estates Development Association, said the property sector in Egypt were facing a general reluctance of investors to pump funds into the market due to unstable political atmosphere.

The sales volume and prices during the transitional period dropped from 30 percent to 40 percent, property developers and traders said. But the expectation for more drop overwhelms the activities of buying and selling.

The government exerts efforts to interfere and attract more investments, especially after the lack of confidence in the sector. There is a governmental tendency to reduce the prices of raw construction materials and consequently the prices of the housing units will decline, according to some citizens.

"The building material market was controlled by the corrupted former regime," said Gomaa.

Egyptians working or doing business abroad always form a big force for investing in the real states sector at this time of the year. However, Gomaa said the protests in the region had a bad influence as many Egyptians were forced to leave their work in Libya, Yemen and Tunisia.

"People coming from abroad will save their liquidity or invest in bank savings," Gomaa added.

However, Gomaa is optimistic that this state of anxiety will be replaced as the government implements new policies to attract Arab investors.

While investors stand against buying, Gomaa asserted it is a good opportunity for purchase now and there might not be such opportunity after the market's recovery.

Many clients started to go through the experience of investing in real estate. Sherief Adel, a 38-year-old engineer, decided with his family to withdraw their bank savings to buy buildings and lands.

"We exerted much efforts to collect big amounts of money. It's our own project and we guarantee that the prices will increase a lot after the presidential elections. At that time we will sell to gain profits," said Adel.

Ahmed Abdel Nour, a real estate expert, said the transitional period created a stress in the general atmosphere of expenditure.

"Reduction in prices does not represent temptation of the investors. The market is almost frozen, no buying nor selling movement," he said.

"All consumers intended to delay their needs till the stabilization of the whole vision in general," he added.

Nour asserted that the market was distorted because it was subject to the balance of demand and supply and the monopoly of raw materials.

The rich class in the society, who control the real estate market and have the capability to wait for a long time to gain profits, cannot represent the real supply power, according to the analyst.

There should be a joint plan by the civil society and the government to control the market, added Nour.

Faysal Hassanen, an Egyptian consultant architect, said the ministry of housing raised the prices of lands and houses without any planning strategy, which encouraged the investors to control the real estate wealth, affected the trade balance and caused a deep gap between buyers and the real estate market.

Hassanen expected the market to return to normal in three months after the presidential elections ended and the prices decreased.

The Ministry of Housing will provide 1 million housing units in the coming five years for the youths. Hassanen said it is a good start but might not meet the aspirations of people.

Meanwhile, a wave of investigations swept the owners of the big real estate institutions as the current government vows to eradicate the roots of corruption after 30 years of nepotism and misuse of public funds.

Steel magnate Ahmed Ezz, a former senior member of the National Democratic Party, and former ministers of housing Ibrahim Suleiman and Ahmed el-Maghrabi have been detained for investigations.

The Supreme Council of Armed Forces took over the rule of the country after former President Hosni Mubarak was forced to resign on Feb. 11 due to protests. The country will elect a new parliament in September and a new president in October or November.

Source: Xinhua
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