The Central Bank of Egypt's decision to allocate 100 billion Egyptian pounds ($6.38bn) to subsidise mortgages for low- to middle-income workers will "not only significantly increase demand", but will also drive development activity in this part of the market, according to a new report from JLL Mena.
The central bank's move is aimed at providing more affordable home loans in a market where interest rates remain high. It is offering a subsidised home loan rate of 3 per cent for 30 years in a country where the policy rate currently stands at 9.25 per cent.
Demand for housing in the capital of the Arab world's most populous nation remains high, despite the fact that about 4,000 new homes were delivered during the quarter and a further 21,000 units will be delivered by the end of the year.
“This is mainly due to the increase in demand for newer gated communities which are now becoming more mature and liveable,” Ayman Sami, JLL Egypt's country head, said.
“The overall rental market increased marginally by 2 per cent and 1 per cent annually in Sixth of October [City] and New Cairo, respectively,” he added.
The increased supply has placed some downward pressure on sale prices, however, which fell by annual 4 per cent in Sixth of October City and 5 per cent in New Cairo.
Egypt currently has a population of more than 101.7 million people, but the country's Central Agency for Public Mobilisation and Statistics forecasts that this will grow to 119.8 million by 2030. The population of Cairo stands at more than 10 million.
The country's property market has been a focus for UAE investors in recent years. Last month, Abu Dhabi's Aldar Properties submitted a bid for Sixth of October Development and Investment Company (Sodic), valuing it at about 6.6bn Egyptian pounds.
Average office rents in Cairo for the first quarter remained flat at about $325 per square metre but vacancy rates fell as demand for serviced offices and space for small and medium-sized enterprises increased.
Demand for hospitality space remained weak, with occupancy rates standing at just 28 per cent as tourism remains affected by the Covid-19 pandemic, the report said, citing figures from consultancy STR.
"Looking ahead, there remains much uncertainty regarding the hotel market performance in the short-to-medium term due to the current situation. However, Cairo’s hotel sector has great growth potential given the strong supply pipeline," JLL Mena's report said.
More than 900 rooms are expected to be delivered this year. The market currently has about 27,000 rooms.