Egypt's North Coast has seen intensive development in the wake of the announcement of several new projects over the last few months around Ras Al-Hikma, one of the Coast's jewels and an attractive destination for investment in residential property. In an interview with Safiya Mounir the executive president of PACT Real Estate, involved in the White Bay residential project on the coast, explained the level of demand for such projects, recent price changes, and how the high price of the dollar has impacted sales and the cost of property units.
How do you see demand in the North Coast area? Demand in the area is high. In general, demand for a second home is high in Egypt, whether in Hurghada, the North Coast, or Ain Al-Sokhna. Sales are now very brisk in most coastal developments in Egypt.
How has this demand impacted the White Bay project? When the project was announced last year, there was demand, but it has increased markedly since April. In the second phase of the project, sales are up. Sales increased markedly last month, and there has been a large increase in purchases compared to last year. Some 25 per cent of units in the second phase have sold since they came up for sale in July. The public has been very responsive to the project, and it has become one of the best-known projects on the North Coast. We have succeeded in giving the public a positive mental image of the project, which became apparent to us through surveys of the better-known new projects in the area. The development sits on 70 feddans in Sidi Hanish on the North Coast and is being implemented in four phases over five years. It involves 600 units of 100 m2 to 400 m2, which the company intends to start delivering in 2018. As a way of providing luxury for unit owners, it has also signed a contract with Cisco Systems to provide smart houses in the project.
What is the reason for the increased demand? Rising inflation is spurring people to try to protect the value of their assets. The recent increase in the price of the dollar undoubtedly led many to buy property. On the other hand, developers have been negatively affected by the increasing cost of materials with the increase in price of the dollar.
How do you see competition for tourist housing? Competition in this sector is fierce, more so than in the regular housing sector. Dozens of developments have been initiated over the last 18 months by the Tourism Development Agency and the Matrouh Governorate, as well as in the Ain Al-Sokhna area. For example, on the North Coast the number of new developments exceeds demand, which makes it hard for developers to make a distinctive product that can attract customers instead of their going to a competing development.
How do you see housing demand in Egypt in general? There is very high demand for medium-cost housing, which represents many jobs for the private sector. Demand from high-end customers has begun to re-emerge despite a decline after 2011. This segment is once again moving.
Have the prices of the White Bay project's units changed since last year? Prices have increased by about 20 per cent, for more than one reason. First, the cost of raw materials has increased markedly, as have transportation and labour costs. Overall, costs have increased by some 25 per cent over the last two years.
How much do units in the development cost? Prices start at LE900,000 for a small chalet, while small villas go for LE3 million. There's a limited number of large villas in the development priced at LE8 million. The cost is paid over seven years with 10 per cent down.
How much is this per square metre? The price per square metre in White Bay varies from LE9,000 to LE20,000 because the company is only building on 17 per cent of the development plot. The average price of a square metre of land on the North Coast in the Matrouh Governorate with utilities was LE300 to LE350 last year. Now it's LE600.
How much investment has been pumped into the project? Some LE40 to LE50 million has been put into the project for a total cost of LE1 billion. Part of the investment is financed by the company and part from revenues made by the company in advance sales.
Does the company intend to take out loans? We're negotiating with several government and private banks for about LE150 million in financing. The aim is to speed up implementation in White Bay.
But many investors find interest rates are an obstacle? I think the cost of getting money from the bank is less than any other source you could turn to.
Does the company intend to get involved in new projects? We're in talks with individuals and institutions to obtain land for a tourist development in Ain Al-Sokhna. We won't announce it before the end of next year, however.
How can the problem of high land costs be overcome in Egypt? The state should make land available to investors on a partnership basis. In exchange for the land, the state would get units that serve limited-income groups without the burden of building them. This would also save investors the cost of the land, since before announcing projects real-estate investors need major liquidity. Under this system, developers would be able to pump this liquidity into implementing new projects on this land.
