Cairo has a serious shortfall in the supply of middle-income housing, the leading real estate investment and advisory firm JLL (Global Commercial Real Estate Services) revealed in its new report. It also urged for significant efforts to be made to address the current imbalance, because shortage has long remained an important and consistent issue across the city’s market.
In 2011, JLL identified the need for an additional 1.5 million affordable homes across Egypt. But, since then, very few projects have been launched by private developers in this target market, which has forced middle-income families to seek accommodation in existing units scattered around older parts of Cairo, the report says.
Price hikes in middle-class housing by 60-80% within 5 years
Middle-class housing will witness a boom in the coming year as the demand by middle-income people for property is still high and will increase, according to Wael Ziada, founder and managing director of Zilla Capital.
Ziada told Daily News Egypt that once the interest rates at banks decrease, middle-class housing will be promoted.
Ziada said that the boom in that category of housing will lead to price hikes in middle-class housing by 60% to 80% within 5 years.
He explained that the short-term price expectations are difficult to be predicted due to the unexpected and successive increases in construction input prices.
Further, he expected the whole sector to witness price hikes not less than 20%, attributing that to the instability of the prices after the devaluation of the currency, in addition to new offers in the New Administrative Capital and New Cairo.
From his part, Mohamed Abdalla, chairperson of Coldwell Banker Middle East and Greater Africa, said that middle-class housing will witness great investments and offers during the coming period due to new offerings in the New Administrative Capital, which will include various middle-income housing projects.
Abdalla noted that the increase in the middle-class housing market will be a natural increase but no exaggeration should be made, noting that the big jump in prices already happened after the flotation of the currency.
He expected an increase of 20% in the prices of real estate.
He does not expect a new offering in middle-class income for the next year, noting that the decrease in interest rate will participate in promoting sales and investments in the sector.
Ali El Shorbany, CEO of Tabarak Holding for Real Estate Development, expected price hikes ranged between 10% to 25% in the coming year in middle-class housing and in the market overall.
Government competes with companies
The total number of housing units that have been implemented and offered by the government to various income segments since President Abdel Fattah Al-Sisi assumed the presidency in 2014 to date reached 1,710,757 units in different areas across different governorates and new cities, in addition to 55,726 units which are being constructed, according to Minister of Housing Mostafa Madbouly.
Some developers and experts accused the government of acting as a contractor or private real estate company and competing with private sector companies in offering property, especially for middle-class housing that is the main business of some companies.
El Shorbany said that the government is the main competitor to the developers, as it competes with them in pricing, which are less than the prices developers offer for projects in the same places.
El Shorbany called the government to lift its hands off the lands so as not to act as a contractor and, in turn, only control and supervise the land offering process in accordance with urban plans.
The state turned into a strong competitor to companies that plan to work in the New Administrative Capital by implementing residential units and preparing to sell at prices difficult for developers to compete with, according to Chairperson of Al Ahly for Real Estate Development Hussein Sabbour.
Middle-class housing financing
“There are 17 banks and three companies participating in CBE’s initiative to finance [housing for] limited and medium-income [people]. There are negotiations to add two new banks and another company to the initiative in the coming period,” said Mai Abdel Hamid, head of the Mortgage Finance Fund.
She explained that the number of beneficiaries of this initiative so far are about 104,000 people, at a value of EGP 9.2bn.
Abdel Hamid added that the fund has disbursed EGP 1.8bn to support the beneficiaries of the initiative since February 2014.