Investment Strategies in Egypt
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Investment Strategies in Egypt
Short Term Investment StrategyKey Opportunity
Within easy reach of most European capitals, Egypt boasts some of the most appealing summer weather for UK holidaymakers. Compared to other countries in the Mediterranean basin, prices are significantly lower while the weather is warmer. However as the demand for Egyptian property increases, prices are sure to rise to meet those currently practiced in neighbouring countries, which will be very rewarding to the early investors. The economy and tourism have grown significantly over the past three years meaning the time to invest is now.
Infrastructure
With a stable political situation, a growing economy, a beneficial tax system and growing middle class, and a positive outlook for all of the above, Egypt offers investors a secure location for real estate investments. Prices are still entry level and emerging market level however they will not remain so for long.
Timescale
For real estate investors in Egypt, the timescale they should be considering is between 5 and 7 years, allowing the economy to develop, alongside the increasing middle class which will both result in a higher demand for housing. As these progress, infrastructures in the country will improve, adding an even larger boost to the tourism sector. Unlike many other destinations, many of the attractions which influence the tourism sector have been virtually unchanged for over five thousand years, and with every year that passes, the mystery surrounding them increases, attracting more and more people.
Generally, investors are required to pay between 20% and 40% on private contract, with one or two payments during construction the remainder being paid upon completion. A property can be held in reservation for as little as 3.000 €
While the returns on short term investment can be very appealing, the returns expected over the next five to ten years in Egypt point to much higher returns.
Key Risks
Every aspect of an investment must be considered when discussing the possibility of investing in real estate. One of the major factors to consider is how attractive your property will prove to be for the end-buyer (planning an exit-strategy). If your property is in a prime location, surrounded by appealing infrastructure in a location with high demand the risks will be virtually none. Important factors to consider is proximity to the beach, facilities on offer at the site, accessibility, and economic growth of the region.
The increase in permanent residents is dictated by the growth of employment or living conditions which is in turn directly related to foreign investment and growth of the economy. The influx of temporary residents is dictated by accessibility, by the abundance or lack of natural and cultural attractions, quality of the developments and surrounding infrastructures, climate and political stability. These factors will influence not only the sales potential of your investment but also the rental potential in the interim.
As always with real estate investments, holding on until the perfect time to sell is an absolute necessity.
If the property you are about to buy is located in a tourist resort, try to find out what facilities it will have and the distance to the ones it lacks. Considering that Egypt is one of the major tourist destinations in the Mediterranean basin, which in turn is one of the most influential tourism destinations in the world, it is considered one of the more secure investments of the market today.
Medium to Long Term Investment Strategy
Key Opportunity
With many developments still offering entry-level prices to the global property ladder, estimates indicate that this will not remain the case for a long time. Prices in Egypt are currently very competitive compared to other areas of the world. Everything indicates that the growth that this country has seen over the past three years will continue for the years to come. The areas surrounding Hurghada are currently under the watchful eyes of many keen investors who are watching their investments develop with pleasure.
From 2003 to 2006, tourism receipts in Egypt showed significant growth from £ 2.25 million GBP to over £ 3.5 million GBP. Towards the end of the year in 2006, the Egyptian Tourism Authority announced its ambitious aim to double visitor numbers from 8 million in 2004 to 16 million in 2014.
Safety
Egypt is used to welcoming tourists to the country and have adapted to tourism very well. Egyptians on the whole are very friendly, and will normally try and provide you with as much assistance as they can when you need it. In general it is a safe and friendly country. As with most of the countries in the Middle East which are associated with large numbers of overseas visitors , recently security concerns have risen Western travellers.
Concerning casual crime such as robberies and muggings, Egypt is considered quite safe, however pickpocketing is considered a larger problem than most Western cities. A concern in Egypt can be the susceptibility of westerners to the non-violent scams and cheating which may occur when westerners try and handle negotiations themselves without proper representation. While irritating, mostly this is harmless and consists of attempting to lure you into a shop where it is hoped that you will make a purchase.
It is wise to keep in mind that Egyptians tend to be a lot more comfortable with less personal space than westerners and some touching (if you are a man an Egyptian man may hold your forearm while speaking to you) is quite common.
Legal advice
When you have chosen the property you are going to invest in, you should seek legal representation to make sure that your interests are protected. The primary function of this legal representation is to carry out a full due diligence report for the property you have chosen. While we at IPW do carry out our own due diligence checks on properties we promote, every investor should carry out their own due diligence checks either through legal representatives or by any other research which they deem appropriate. Checks which are recommended include legitimacy of the project, solvency of the developer, etc.
Legal representation will also ensure that all of the necessary paperwork has been done before investors commit to signing a purchase contract.
Once the due diligence checks have returned favourably, a private contract will be prepared between the developer and the investor which will specify all of the terms and conditions including delivery date. Upon signing this contract, the investor makes a non refundable payment (an agreed percentage of the sales price minus the original reservation deposit).
The property is then registered at the Notary as belonging to the investor.
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