Will Egypt Be The Next Dubai?

[Organics1]

Is The Red Sea Set to Fall and Be The Next Dubai?

Hi All,

For some time now I have been on the hunt for a property on the red Sea but for one reason or another It has happened......yet!

Every time I got close to putting down a deposit on a particular project I read something negative about it, be it the Developer, agent, schedule, finish etc, etc.

The point of my purchase was initially as an investment but now I'm considering moving there for good.

Now I'm starting to think with there being so many developments to choose from and more on the way will there be the "supply and demand" situation which is now happening in Dubai.

With so many projects on the Red Sea going to be completed in the next 12 - 18 months, I feel that there will be a lot of units unsold and or owners who had hoped to flip the property unable to do so.

There are already members on here (mentioning no names) who have been trying to sell their properties for the last 12 months with no luck at all. I know some other members have had success's in re-selling for good profits but that was in the early days with no such results as of late.

A lot of people had initially bought with cash and were going to complete by raising finance back home or in Egypt but with the current economical climate I don't know how feasible this is going to be or whether people will actually want to do this depending on their personal situations.

It's also been mentioned on here before about how MANY empty properties there will be as owners are struggling to rent them out. And even if you've got a "guaranteed rental" this has already been factored into the price and will the developers "actually pay out" if things get worse.

So other than those buyers who can afford to have 30k+ of there hard earned money sitting in a property in a different country which is generating no income and not increasing in value there will be a lot of buyers falling into the "distressed sale" category.

Also considering that the price of unfinished properties has already increased due to the value of the Egyptian Pound this will make the whole purchase more expensive than originally intended.

Now all you have to do is go into the Dubai forum and see that these are the exact same problems that the majority of owners are now going through. Because of this property prices have fallen up to 40% in some cases from the height of 2008 prices with some analysts predicting as much as 70%!!!

Distressed sales are now common place with owners in Dubai selling well below what they paid for their properties "to get out".

Although I fully understand that Egypt's economy is different there is still a big risk that this will happen on the Red Sea resort if things don't drastically change in the next 12 months.

Just have a look at the amount of unsold properties that there still are directly from the developer. I have no idea why they're allowed to build more before they've sold or at least finished what they've started.

I personally have decided to wait until a large majorities of developments have been completed so I can see what I'm getting. Although I am taking a bit of a risk I believe it's a calculated risk and feel that I will be able to buy for cost or below cost as there will be so much supply on the market.

Only time will tell I guess!

I am very interested to get other view points on this.

 

[mtrtnik]

I think it won't be so bad as may happen in Dubai or is already happening as you wrote. Main difference is that prices in Egypt are low when comparing with Dubai and hence available to bigger population of people. It's true that because of crisis sales have reduced but still apartments are sold every day. I think if you have many and want to buy your self apartment you have to be patient and try to find some bargain as there'll be some because of world financial situation. But as it looks last month or two stock market is doing very well and this will also have positive effect on everything. It's just my deliberation and how I see situation.

 

[danny]

Hi All,

For some time now I have been on the hunt for a property on the red Sea but for one reason or another It has happened......yet!

Every time I got close to putting down a deposit on a particular project I read something negative about it, be it the Developer, agent, schedule, finish etc, etc.

The point of my purchase was initially as an investment but now I'm considering moving there for good.

Now I'm starting to think with there being so many developments to choose from and more on the way will there be the "supply and demand" situation which is now happening in Dubai.

With so many projects on the Red Sea going to be completed in the next 12 - 18 months, I feel that there will be a lot of units unsold and or owners who had hoped to flip the property unable to do so.

There are already members on here (mentioning no names) who have been trying to sell their properties for the last 12 months with no luck at all. I know some other members have had success's in re-selling for good profits but that was in the early days with no such results as of late.

A lot of people had initially bought with cash and were going to complete by raising finance back home or in Egypt but with the current economical climate I don't know how feasible this is going to be or whether people will actually want to do this depending on their personal situations.

It's also been mentioned on here before about how MANY empty properties there will be as owners are struggling to rent them out. And even if you've got a "guaranteed rental" this has already been factored into the price and will the developers "actually pay out" if things get worse.

So other than those buyers who can afford to have 30k+ of there hard earned money sitting in a property in a different country which is generating no income and not increasing in value there will be a lot of buyers falling into the "distressed sale" category.

Also considering that the price of unfinished properties has already increased due to the value of the Egyptian Pound this will make the whole purchase more expensive than originally intended.

Now all you have to do is go into the Dubai forum and see that these are the exact same problems that the majority of owners are now going through. Because of this property prices have fallen up to 40% in some cases from the height of 2008 prices with some analysts predicting as much as 70%!!!

Distressed sales are now common place with owners in Dubai selling well below what they paid for their properties "to get out".

Although I fully understand that Egypt's economy is different there is still a big risk that this will happen on the Red Sea resort if things don't drastically change in the next 12 months.

Just have a look at the amount of unsold properties that there still are directly from the developer. I have no idea why they're allowed to build more before they've sold or at least finished what they've started.

I personally have decided to wait until a large majorities of developments have been completed so I can see what I'm getting. Although I am taking a bit of a risk I believe it's a calculated risk and feel that I will be able to buy for cost or below cost as there will be so much supply on the market.

Only time will tell I guess!

I am very interested to get other view points on this.

Maybe the question should be reversed, is Dubai going to be the next Egypt.
At least Dubai have considered a regulatory body to try and unravel the mess there, Egypt haven't a clue.
There will not be an over supply in Egypt as it is solely cash based and developers cannot complete on the hope that mortgages can be raised for purchases as they do not exist.

Anyone who has a paid for and received a completed apartment should be in a very strong position as I personally don't believe that a lot of pre-construction or part constructed developments will ever be completed.

 

[Organics1]

I think it won't be so bad as may happen in Dubai or is already happening as you wrote. Main difference is that prices in Egypt are low when comparing with Dubai and hence available to bigger population of people. It's true that because of crisis sales have reduced but still apartments are sold every day. I think if you have many and want to buy your self apartment you have to be patient and try to find some bargain as there'll be some because of world financial situation. But as it looks last month or two stock market is doing very well and this will also have positive effect on everything. It's just my deliberation and how I see situation.

I totally agree that prices on the Red Sea are cheaper which made it more attractive to more people. I'm not saying that people will lose a huge amount of money (I sincerely hope they don't) but most of the people and I know I'm generalizing, bought off-plan to be able to either rent out or sell for a nice profit. In my opinion I don't think either of these will happen and so you don't need to buy off plan and you can wait to see the finished product. Yes there has been a surge in the stock market but that's due to the banking sector shares having some kind of a recovery. The Pound still remains very weak to where it was a year ago to most currencies and although I realize that it's not just the UK buying in Egypt they were and probably still are a good majority.

 

[Organics1]

Maybe the question should be reversed, is Dubai going to be the next Egypt.
At least Dubai have considered a regulatory body to try and unravel the mess there, Egypt haven't a clue.
There will not be an over supply in Egypt as it is solely cash based and developers cannot complete on the hope that mortgages can be raised for purchases as they do not exist.

Anyone who has a paid for and received a completed apartment should be in a very strong position as I personally don't believe that a lot of pre-construction or part constructed developments will ever be completed.

Interesting point of view Danny and agree about what the Dubai authorities are "trying to do". However from what I read it still seems to be falling very, very short of what's needed but light years ahead of what's going on or "not going on" in Egypt. I still feel that I'll be able to wait and see the finished product before committing to a purchase and not to have to pay the premiums that were going around a year or so ago.

 

[mtrtnik]

I totally agree that prices on the Red Sea are cheaper which made it more attractive to more people. I'm not saying that people will lose a huge amount of money (I sincerely hope they don't) but most of the people and I know I'm generalizing, bought off-plan to be able to either rent out or sell for a nice profit. In my opinion I don't think either of these will happen and so you don't need to buy off plan and you can wait to see the finished product. Yes there has been a surge in the stock market but that's due to the banking sector shares having some kind of a recovery. The Pound still remains very weak to where it was a year ago to most currencies and although I realize that it's not just the UK buying in Egypt they were and probably still are a good majority.

I think people will not lose money at all, it's only that they won't earn it quick and easy. I'm talking this from my personal experiance Bought 2007 Suleder off-plan and still today everything is not finished as neccessary so I hired snagger and he's doing great job at the moment. But I do feel quite secure with more or less finished apartments along with all legal papers and altought when I was buying Sterling was 1,4 to EUR I'm still in profit. Not so big as I first expected but I'm very satisfied that at least investment retained its value meanwhile lof of my friends lost big money on stock exchange. I know I'll sell all units one day, it'll just take me more time and I think everybody should get used to that because there won't be easy money as it was before this crisis.
The other point Danny pointed out about moratges is also very important.

 

[Organics1]

I think people will not lose money at all

This is what people were saying about Dubai up until last year and now look

However I hope you're right.

I was also wondering if you could also explain how you are in profit as you've mentioned. Have you actually re-sold your property and seen this profit or are you just basing this on current developer asking prices?

I'll give you another example. A very close relative purchased a property off plan 3 years ago in Ein El Sokhna for 400,000 EGP. He is now trying to resell for 800,000 EGP and hasn't had any interest at all. Now you might say that's because he's asking a 100% premium but actually there are still 200 properties unsold in the Pyramids at Porto Sokhna and the developer is asking 1,400,000 EGP for the same type of apartment. So it's actually a VERY good deal if you want to buy a finished property. However there just aren't the buyers out there at the moment and he's starting to realize that he may either have to wait a very, very long time to sell it, leave it empty or keep reducing the price until someone takes it.

 

[mtrtnik]

Profit is not taken profit but calculated and I'm well aware that this can also goes from + to - one day but so far I'm quite confident. There were people looking my apartments but level of finishing was so pure that they didn't decide to take it and they rather took some other place at the end.

It's just not best time for selling at the moment but who purcahsed with cash and no mortage shouldn't have problems at all. When crisis is over I'm sure sales will go to previous level.

 

[danny]

Interesting point of view Danny and agree about what the Dubai authorities are "trying to do". However from what I read it still seems to be falling very, very short of what's needed but light years ahead of what's going on or "not going on" in Egypt. I still feel that I'll be able to wait and see the finished product before committing to a purchase and not to have to pay the premiums that were going around a year or so ago.

Every market bottoms out eventually and if we all knew where that bottom was we would all be very rich but, because no one knows when the market is at it's lowest, we eventually have to make a decision to purchase.

I was fortunate that I bought pre-construction for 200,000le 3 years ago and sold in January for 500,000le. I then bought a like for like constructed apartment in February this year for 250,000le because I struck a deal for cash.

Deals for pre-construction will always be competitive as there appears to be no comeback if the product isn't delivered on time or at all in this country at present.

However tangible real estate will not drop much lower going forward, in my opinion, but attract a premium in these uncertain times.

 

[Georgina]

I bought six years ago when no-one was coming to Egypt and America was bombing Iraq. The road between El Gouna and Hurghada was full of construction shells with no activity. Then suddenly it went crazy and prices went through the roof. I looked at off plan and one resale in El Gouna. I had confidence in El Gouna because it is now 20 years old and survived many rough times i.e. 9/11 when villas were around GBP10,000. But my plan was to look for a home in the sun. The plan was never to sell. I wanted to live here with year round sunshine in a place I could walk everywhere and don't have to own a car. Somewhere with great diving and a cheap place to live. If you say you are now thinking of moving here then what does it matter if there are so many rental properties and prices go up and down. If you have your 'home in the sun' and the Red Sea Coast is the place for you then that should be the main concern?

 

[mtrtnik]

Totaly agree with Georgina. There are two types of buyers in Egypt and not only Egypt but also worldwide. People who intent to live in property they bought and people who invest money in properties and want to get capital gain from this. I don't know exact ratio between these two groups in Hurghada/Red Sea but would be certainly very interesting information. I think nowdays buyers belong to first group altough you can find somebody with lot of cash who's taking advantage over current crisis and buying for good price. Only question is when will they manage to resale this units but I think it shouldn't be problem in period 3-5 years.

 

[Organics1]

I bought six years ago when no-one was coming to Egypt and America was bombing Iraq. The road between El Gouna and Hurghada was full of construction shells with no activity. Then suddenly it went crazy and prices went through the roof. I looked at off plan and one resale in El Gouna. I had confidence in El Gouna because it is now 20 years old and survived many rough times i.e. 9/11 when villas were around GBP10,000. But my plan was to look for a home in the sun. The plan was never to sell. I wanted to live here with year round sunshine in a place I could walk everywhere and don't have to own a car. Somewhere with great diving and a cheap place to live. If you say you are now thinking of moving here then what does it matter if there are so many rental properties and prices go up and down. If you have your 'home in the sun' and the Red Sea Coast is the place for you then that should be the main concern?

Hi Georgina,

Hope you're well.

Clearly you bought at the right time financially and for your personally which is great. I'm just trying to do exactly the same thing

Yes I am considering moving there full time for various reasons but that doesn't mean that I'm going to pay over the odds for a property if I feel that prices are still going to come down further. Take the UK at the moment. 10s of thousands of people are holding back from buying their home as they feel prices are still falling. Although I want to move there full time, I also want a property that if things change and I need to leave or want to sell or rent it out, that I'll be able to do so without waiting a year or two or losing a bundle.

I don't have a lot of money and as it's all cash from savings I have to make sure I spend it as wisely as possible.

As I put in my original post I know I'm taking a risk but I clearly hope and feel it's a calculated risk

 

[Georgina]

Then I think you need to spend some time here so you can really get to know the areas and developments and hunt out a bargain from someone who needs to sell quickly. Whatever happens here for sure there will always be buyers looking for front line sea view and rentors too. It is not the same as living in Europe and with all the problems in Hurghada you need to choose carefully and make sure that once you have bought a property that is a good price they are not going to sting you with extortionate maintenance and utility charges or furniture packs.

 

[Organics1]

I also understand that this thread is likely to get varying view points, from different people, for various reasons.

1 - From people who already own or are buying off-plan

2 - From agents selling properties in Egypt/Red Sea

3 - Developers selling there own developments

4 - People who have not bought yet and are still considering a purchase

 

[Organics1]

Then I think you need to spend some time here so you can really get to know the areas and developments and hunt out a bargain from someone who needs to sell quickly. Whatever happens here for sure there will always be buyers looking for front line sea view and rentors too. It is not the same as living in Europe and with all the problems in Hurghada you need to choose carefully and make sure that once you have bought a property that is a good price they are not going to sting you with extortionate maintenance and utility charges or furniture packs.

I have to agree 100% and this is why I am very close to deciding to go into rented accommodation for say 6 - 12 months and have a good look around.

 

[Georgina]

I have to agree 100% and this is why I am very close to deciding to go into rented accommodation for say 6 - 12 months and have a good look around.

I think this is an excellent idea. I am not in real estate but with all the problems with off plan properties in Hurghada I can't see prices going up so what is the rush. Take your time until you know the decision you are making is the right one for you. I wish you all the best.

 

[propertastic]

I really don't see any correlation between Dubai and the Red Sea markets.

When I started propertastic.com in late 2006 there were already noises that the Dubai market was turning into a bubble which was due to burst anyway in 2008/2009 even without the credit crunch for the simple reasons of supply and demand. More property was being delivered onto the market than there was demand for that accommodation.

The amount of property being built in Hurghada and Sharm at the moment is still just a small fraction of that which as been built over recent years in Dubai.

The signs of a bubble market is when people are buying property solely because they expect to sell on at a profit and have no intention of using it themselves.

It is true that some people are buying in Egypt purely for investment purposes, but most are buying for their own use, plus some capital appreciation plus some rental income.

The longterm rental market in Hurghada is incredibly bouyant and rental properties that are finished are surprisingly high. I toured a couple who were living in Spain and they were very surprised that monthly rental prices here are not much lower than in Spain.

I was surprised to find that middle class Egyptians are now in the rental market for the resorts supposedly built just for foreigners. These middle class Egyptians don't want to live in typical Egyptian properties and they can't afford villas, but they can afford to rent in the resorts in El Kawser, and so they are doing so.

There is still a major undersupply of firstline properties. In central Hurghada, you really only have the Esplanada and Hurghada Marina to choose from and prices here start at $250,000-$300,000 for a good sized two-bed.

Russians are emigrating here in their droves and are looking for affordable properties because Russia is a mess these days.

Hurghada has basically doubled in size every seven years over the past 20 years. When you compare Egypt with any other developing market such as Turkey and Morocco (neither of which have 12 months/year sunshine) the amount of building here is a drop in the ocean.

The day when Egypt is no longer the cheapest alternative for a short-haul place in a sun, the market will peak. But there is still a long way to go before that happens.

Donald Trump is now confirmed as investing heavily into Egypt with his Trump Serrenia project at Sahl Hasheesh. He is not a guy known for not doing his homework when it comes to property investments.

 

[The Smart Money]

Mortgages are available

"There will not be an over supply in Egypt as it is solely cash based and developers cannot complete on the hope that mortgages can be raised for purchases as they do not exist"


I beg to differ..........Mortgages are available, more info here

:: Taamir Mortgage Co. ::


I do agree with you however, in that Egypt will be the next Dubai (but only in another 10-15 years time),Dubai has made some people very very rich, and it will also make some bankrupt, its all about timing, those who get in early at the start of the cycle will profit greatly (see attached jpeg) in my opinion we are at the 'take off' stage in Egypt

credit availability and herd mentaility is what drives property markets, you only need to look at the property markets in the UK, US, Dubai el tel in the last 10 years to realise that they were simply credit bubbles

 

[danny]

"There will not be an over supply in Egypt as it is solely cash based and developers cannot complete on the hope that mortgages can be raised for purchases as they do not exist"


I beg to differ..........Mortgages are available, more info here

:: Taamir Mortgage Co. ::

Briefly glossing through the guidelines it would appear that these mortgages will be of no use to most purchasers as they only apply to registered properties and not for pre-construction purchases.

 

[The Smart Money]

Danny, who would gives mortgages on uncompleted property anyway? isnt it a given that mortgages are only available for registered properties?