Despite the resignation of the Egyptian parliament in February, progress on the political roadmap continued during Q1 2014, according to the latest report by Jones Lang LaSalle (JLL), entitled: Cairo Real Estate Market Overview for Q1 2014.
The next stage in the political roadmap for Cairo is the presidential elections (currently scheduled for late May), with General Abdel Fattah El-Sisi widely expected to win by a large margin. However, the conduct of the election and how the results will be accepted will go a long way in determining how quickly confidence returns to the real estate market.
Economic news during Q1 2014 was mixed, with a slight bias on the positive side, due in part to the continued financial and political support from the GCC region (except Qatar).
For the first time since June 2013, foreign reserves increased to EGP17.3 billion (approximately $2.5bn) in February. While the stock market retreated following El-Sisi’s recent resignation from the army (to be able to run for president), the EGX 30 index remains 70 per cent above what was observed in mid 2013, suggesting that business confidence is returning. This is also reflected in the purchasing managers’ index (PMI), which rose from 48.7 in January to 50 in February, but it remains below the levels seen in late 2013.
The government’s financial position also seems to be stabilising, with the budget deficit decreasing by eight per cent to EGP123.6bn in February, down from EGP146.5bn at the end of 2013.
Furthermore, government revenues reached approximately EGP255bn in Q1 2014. With improved revenues, the interim government intends to borrow EGP205bn in treasury bills in Q2 to help boost industrial production and tourism. With continued economic stability over Q1 2014, it has been predicted that a real GDP growth of approximately 3.5 per cent is expected between 2014 and 2015, from 2.4 per cent in 2013 and 2014.
Emirati retail developer Majid Al Futtaim has announced plans to invest EGP16.5bn in the Egyptian market over the next five years. This includes plans for four new shopping malls in Cairo, Giza and Alexandria, and 32 hypermarkets across the country. It is estimated that these investments could create up to 42,000 additional jobs.
The government has also announced plans to increase the minimum wage to EGP1,200 per month, although this recommendation is yet to be implemented.
Moreover, the newly approved constitution includes an article allowing the tax authority to impose taxes on remittances by Egyptians living abroad. If this article is enforced, it could increase government revenues by as much as EGP6bn.
Egypt’s minister of tourism has announced plans to revive the tourism sector, with new initiatives within the country and opening of overseas travel offices.
A major target market for Egyptian tourism is Russia, with plans to attract three million Russian tourists during 2014. Another plan is to promote investment in the country’s new hospitality infrastructure. Last quarter also saw the opening of one of the region’s largest cable water ski parks in El Gouna.
The Arab Fund for Economic and Social Development has signed an agreement with the interim government to invest $412 million in Egypt.
Real estate spending seems to be on the rise this year, with the central bank allocating up to EGP10bn of financing mortgages for individuals with low and medium incomes.
The UAE-based construction giant, Arabtec Holding, has created a new subsidiary, Arabtec Egypt for real estate development in the country and appointed Sami Asad as CEO. This unit will be responsible for delivering one million affordable homes in 13 locations across Egypt, under a $40 billion deal with the army that was announced in Q1 2014.
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