Egypt's house prices falling sharply; but outlook remains positive
Despite robust economic growth Egypt's house prices are falling. The probable reason is nervousness.
Under President El-Sisi, Egypt is a police state run by the army, with high levels of corruption, so there are people who want to move money abroad. And for the past two years it has been possible to freely move money out of Egypt, which reduces the attractions of local real estate as an inflation hedge. On the other hand, tourism is booming again, the currency is free-floating, the economy is recovering, and Egyptian real estate is cheap. So the likely outlook is medium-term falls, but longer-term recovery.
The nationwide real estate price index fell by 11.7% during the year to Q1 2019, in contrast with the y-o-y growth of 18.2% seen in the same period last year, according to Egypt's leading real estate portal Aqarmap. When adjusted for inflation, the decline almost doubled to 22.6%. Egypt's high inflation rate is the reason for the huge gap between the nominal and the real price changes.
Five years after President El-Sisi assumed power, much has changed in Egypt. While formally a democracy, Egypt now has a tightly controlled press and media, and many political prisoners. On the economic front, in November 2016 Egypt floated the Egyptian pound (EGP), causing a dramatic depreciation against major currencies.
Foreigners can buy property in Egypt, under Law No 230 of 1996. However, foreigners cannot buy more than two pieces of real-estate, which cannot exceed 4,000 square metres (sq. m.), and their purpose must be for a family member to live in the property. If registered, the property cannot be sold or rented for five years.