The Credit Crunch & Egypt

[anokayperson]

Hi - without wanting to cast gloom and despondency around (there's enough of that on the TV at the moment regarding this) - does anyone have any thoughts on this with the Egyptian economy.

Will this country escape it and if so why?

Any comments please in this period of uncertainity ?

 

[dave2u]

would have thought it has to lots of europeans buying and everones going to feel the pinch also as the prices are now higher i think this will effect sales in a big way.May see some pull out before commiting there deposits.would like to see developers finishing what they have instead of starting more and more the place is full of empty shells as it is

 

[mtrtnik]

As far as I know there aren't so many mortages in Egypt and people were mainly paying their properties in Egypt with cash so from this point of view I see no problems. But from other side people have taken mortgages in their countries and buying properties in Egypt and this will stop or at least slow down so it may have impact on sales. Maybe some of agents can tell us better if sales are on same level as for example year ago or 6 months ago.

 

[Lsab]

Egypt won't get away with it I'm sure. It's going to affect most countries wouldn't you think? The stock market in Egypt fell by 16% today which was the highest fall among the Arab countries. I still think that money is safer in property than in the bank but that's just my opinion!!

 

[johnwayne]

As far as I know there aren't so many mortages in Egypt and people were mainly paying their properties in Egypt with cash so from this point of view I see no problems. But from other side people have taken mortgages in their countries and buying properties in Egypt and this will stop or at least slow down so it may have impact on sales. Maybe some of agents can tell us better if sales are on same level as for example year ago or 6 months ago.

That's a point - any agents out there willing to give their two penneth on how the Egyptian market will be affected by all that's currently going on around the world please?

Is Egypt's economy that well protected?

 

[johnwayne]

Sorry Lsab - didn't see your post - beat me to it!

 

[belfast-connection]

sorry could I ask a slightly different question on the stability of the banks out there

and what guarantees there are

I'm waiting for an agent to indicate that a developer will complete with me and am then intending to CHAPS 40% deposits on 2 units

but I'd be a bit concerned now about a developer putting that in an egyptian bank and as to how protected (i) the bank and (ii) the developer is as banks continue to get into difficulty

anybody any views on this

 

[NeilHollingsworth]

Ask which bank they are using, quite a few use HSBC and if that folded i think we will all be in trouble. I know HSBC wanted to stay out of talks with the government last night but even they have included themselves so if using HSBC i would assume you would be ok.

 

[HORIZON]

I do not know about the bank laws and protection here, however, I do not see banks getting in difficulty at all.

There can be a problem beacuse of Egypt's dependency on currencies, and while they are unstable as they are, the economy can fluctuate slightly.

However, Egypt at all does not depend on imports, as the economy is supplying itself with practically everything it needs.

I would see a decrease in interest from investors in Europe and mainly the time gap to decide on wether to buy has increased a lot The tourist flow should diminish slightly. However, the Red Sea area is changing its focus to Russian market, which is turning away from stocks to property markets and the interest is constantly growing. This happens also because the Russian community here is quite big.

Of course financial indicators will be affected by the global recession, however, I see minor impact to Middle East region (however, it will also depend on government economic policies during the period).

 

[iain]

I do not know about the bank laws and protection here, however, I do not see banks getting in difficulty at all.

There can be a problem beacuse of Egypt's dependency on currencies, and while they are unstable as they are, the economy can fluctuate slightly.

However, Egypt at all does not depend on imports, as the economy is supplying itself with practically everything it needs.

I would see a decrease in interest from investors in Europe and mainly the time gap to decide on wether to buy has increased a lot The tourist flow should diminish slightly. However, the Red Sea area is changing its focus to Russian market, which is turning away from stocks to property markets and the interest is constantly growing. This happens also because the Russian community here is quite big.

Of course financial indicators will be affected by the global recession, however, I see minor impact to Middle East region (however, it will also depend on government economic policies during the period).

Whilst it is not possible to define the Egyptian economy in a few lines, I think the above is slightly misleading (though I am certainly no economist). Imports - you say Egypt does not depend on these - merchandise imports reached a level of almost US$ 38,000 million against exports which were US$ 22,000 million in 2007.
Egypt earns most of its income from oil, the Suez Canal, tourism, and workers' remittances with some other areas looking promising for the future. (Sources of figures can be seen on Wikipedia - Egypt)

The GDP is rising well around 7-8% growth with inflation now showing at about 12%. I think the real key and to a large extent worry is the population which grew from 65 million in 2001 to some 75 million in 2007/8 and is likely to keep growing at quite a rate. The land and other resources can not sustain this population and it really is a potential time bomb if not handled.

It is also worth mentioning that the income from oil, the Suez Canal, tourism, and workers' remittances is largely out of the control of the Egyptian Economy - and dictated by World events - with the credit crunch all of the above sources of earning look likely to fall.

Of course one can argue that Egypt is in a good position at present and that is to some extent true, but it can be damaged quite quickly by World events.

The point is for me that it's a great place to find the sun, good people (but they must also benefit from our investment) and we can afford the living costs.

For now I'm glad to have invested in a property in Egypt than bought more UK bank shares.

Iain

 

[danny]

However, Egypt at all does not depend on imports, as the economy is supplying itself with practically everything it needs.

Egypt relies heavily on imports, there is very little manufacturing industry in this country at all, you only have to go into the local souvenir shops and lift up an alabaster pyramid to find the well known phrase "Made in China".

 

[Organics1]

I really can't see how Egypt or any other country's property industry will be able to ride this storm unaffected.

In responce to one of the posts which said that "most people are buying cash", I'm not sure that's quite accurate. From my research what a lot of people are doing is pay the first or second installments in cash but were going to either get a mortgage, re-mortgage or get a loan for the completion. With the current state of the banking industry and UK economy there will be a lot of people who are worried about making that final commitment and hence the term "distressed sale" came into place. This happened a lot in the Dubai market which I was involved in quite heavily and people were selling their properties near completion for the original price they paid years prior. Also don't forget the "flipper". There are thousands of investors who never had any interest on completing the transaction and are banking on turning the property for a profit pre completion. Un-like the hight of the Dubai market where investors were making up to 200% profit on their investment, I think there are a lot of investors who are already starting to think about how they're going to pay the completion monies as they are struggling to flip on the contract.

In responce to the post about Egypt "concentrating on the Russian Market" there is one quite simple factor behind this "cash, cash, cash". When the anti money laundering laws came into effect in the UK there was a VERY SHARP drop in Russian investments. Just ask any London estate agent or even more any Major London auction house in both the antique and property market who will 100% agree. I guess Egypt turns a blind eye to where the money comes from as long as it's economy continues to grow. I off course am not tarnishing every Russian with the same brush but it's quite interesting that they "concentrating" on that market.

Egypt has just grown way, way to quickly and I agree with one of the posts which says it would be good to see some of these developers finish what they've started before starting on their next project.

 

[Lsab]

Interesting post Organics. Thank you.

 

[HORIZON]

Egypt relies heavily on imports, there is very little manufacturing industry in this country at all, you only have to go into the local souvenir shops and lift up an alabaster pyramid to find the well known phrase "Made in China".

I really do not think you can say much about Egypt's manufacturing by visiting souvenir shops, as well as you cannot tell about Egypt from visiting Hurghada or Sharm El Sheikh only.

 

[HORIZON]

I really can't see how Egypt or any other country's property industry will be able to ride this storm unaffected.

In responce to one of the posts which said that "most people are buying cash", I'm not sure that's quite accurate. From my research what a lot of people are doing is pay the first or second installments in cash but were going to either get a mortgage, re-mortgage or get a loan for the completion. With the current state of the banking industry and UK economy there will be a lot of people who are worried about making that final commitment and hence the term "distressed sale" came into place. This happened a lot in the Dubai market which I was involved in quite heavily and people were selling their properties near completion for the original price they paid years prior. Also don't forget the "flipper". There are thousands of investors who never had any interest on completing the transaction and are banking on turning the property for a profit pre completion. Un-like the hight of the Dubai market where investors were making up to 200% profit on their investment, I think there are a lot of investors who are already starting to think about how they're going to pay the completion monies as they are struggling to flip on the contract.

In responce to the post about Egypt "concentrating on the Russian Market" there is one quite simple factor behind this "cash, cash, cash". When the anti money laundering laws came into effect in the UK there was a VERY SHARP drop in Russian investments. Just ask any London estate agent or even more any Major London auction house in both the antique and property market who will 100% agree. I guess Egypt turns a blind eye to where the money comes from as long as it's economy continues to grow. I off course am not tarnishing every Russian with the same brush but it's quite interesting that they "concentrating" on that market.

Egypt has just grown way, way to quickly and I agree with one of the posts which says it would be good to see some of these developers finish what they've started before starting on their next project.

Regarding blind eye It is not so easy for Russians to transfer the money to Egypt even for the first contractul deposit anymore. Of course they can go around the corners, but they are already asking for papers (invoices, contracts) from developers which would ease up the transfer of money form major banks in Russia..

 

[danny]

I really do not think you can say much about Egypt's manufacturing by visiting souvenir shops, as well as you cannot tell about Egypt from visiting Hurghada or Sharm El Sheikh only.

Maybe you should read Iains response which goes a little deeper than mine.

 

[HORIZON]

Maybe you should read Iains response which goes a little deeper than mine.

Let us not guess and go through the links below for the newest reports for Egypt: import/GDP ratio suggested to be about 20% lately.

http://www.mof.gov.eg/English/Egypt Economic Outlook- September 2008.pdf

Ministry of Finance Portal - Reports and Indicators - The Financial Monthly - September 2008

http://www.mof.gov.eg/English/Reports/monthly/2008/Sep08/t45.pdf

 

[HORIZON]

Banking system

Regarding belfast-connection's post on banks' stability and protection/supervision, I guess a portal of Central Bank of Egypt will be useful Central Bank of Egypt.

 

[iain]

Interesting reports Violeta. My point still remains valid though - imports exceed exports which was the point I was making and Egypt very much relies on imports.

Critically the income from the "External" sources, Suez canal dues, overseas workers, Oil+Gas and tourism cannot be influenced greatly by Egypt in the face of possible (probable) World turndown.

Also if you look into the figures, Egypt have a high cost in food subsidies and the 30% increase in salary to public sector workers. These are being recouped by extra taxes on energy, cars, and so on. As the population increases further this will be real difficulty.

Having said that I think Egypt has come a long way and been very skillful in bringing their economy forward. It will be a balancing act to keep that progress.

As to the strength of the banks, if the banks in a country such as Iceland (formerly with a high MOODY rating) can effectively go bust then we all had better take care - Egypt was downgraded by MOODY earlier this year I think, citing the various problems unique to Egypt (subsidies etc).

Anyway if the great and good of our Countries can sort out this banking mess and restore some confidence then we can hope that this discussion is purely acedemic.

Bye the way - presumably there are plenty of Russians who can transfer money legally - I'm sure it's not only in cash! ?

Iain

 

[dave99]

How about currency as an indicator

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If you make a simple assumption that the "value" of a country is at least partly found in the strength of it's currency then you would have to conclude that Egypt is far more "safe" or "stable" than the UK since the UK currency has fallen against the the Egyptian pound by over 10% in the last 6 months.
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Which put simply means that money in property in Egypt is a better place to be than in the UK.

Hopefully the UK currency will recover some of the fall in the near future but it does mean that developments priced in Sterling are better value than those priced in other currencies whilst there is this difference.
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