(MENAFNEditorial) JLL, the world's leading real estate investment and advisory firm, has released its first quarter (Q1 2014) Cairo Real Estate Overview report
While there remains significant uncertainty and possible downside risks on both the political and economic fronts, the most likely scenario is for the Cairo real estate market to remain subdued in the short term, ahead of a potential period of gradual recovery from late 2014 or 2015
Summary highlights, Cairo Market Overview, Q1 2014
€¢ Despite the resignation of the Parliament in February, progress on the political road map has continued during Q1 2014, with the President quickly forming a new Parliament, comprising of Ministers more in line with the prevailing vision of improving security and boosting the economy.
€¢ The upcoming presidential election (scheduled for late May) is the major short term political challenge facing Egypt. The conduct of the election and how the results are accepted will go a long way to determining how quickly confidence returns to the real estate market
€¢ Economic news over Q1 2014 has been mixed with a slight bias on the positive side, with the assistance of continued financial and political support from the GCC (except Qatar).Positive signs including
€¢ the first increase in foreign reserves since June 2013, foreign reserves have increased (to EGP 17.3 billion in Feb)
€¢ The EGX 30 index remains some 70% above its lows of mid-2013
€¢ Returning business confidence reflected in the purchasing manager's index (PMI) increasing from 48.7 in Jan to 50;
€¢ Decreased budget deficit and improved government revenues
€¢ With continued economic stability over Q1 2014, expectations are that real GDP growth of around 2.4% will be recorded in financial year 2013/14, increasing to around 3.5% in 2014/15
€¢ While there have been new completions in the residential and retail sectors during Q1, many projects continue to be delayed given construction and permit issues and the uncertain political outlook
€¢ The office market saw a marginal decrease in vacancies (to 21%) but this was not significant enough to result in any increase in average rentals, that remained unchanged during Q1
€¢ There has been a shift of demand within the residential leasing market, away from villas (where rents have declined) towards apartments (where rents have increased) as apartments are seen as more secure and are often available on a shorter term lease
€¢ The retail market has been relatively quiet during Q1, with no significant completions and average rentals remaining largely unchanged. The most active sector of retail demand has been from F&B operators for space within malls and in street front locations
€¢ Tourist numbers declined during Q1, resulting in lower average occupancy rates in the hotel sector. Operators have been able to retain previous RevPAR levels by compensating for lower occupancies with higher average room rates (ADR's)
Ayman Sami, Head of Egypt Office at JLL, said: "Egypt's political situation remains a primary driver of economic conditions, and therefore the real estate market in Cairo. All four sectors of the Cairo market – residential, retail, office and hotel – remained relatively subdued and close to the bottom of their current market cycle during Q1 2014. This is not uncommon ahead of noteworthy elections, and we will monitor them closely to see what the likely impact on real estate will be going forward. If political stability continues to drive an improvement in the economic environment, then rents could start to increase again towards the end of 2014.
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