Will inflation affect the real estate market in Egypt in 2023?

Will inflation affect the real estate market in Egypt in 2023?

Amal Ali 16 Mar 2023

Real estate is one of the sectors preferred for investing by Egyptians for a long time. Real estate is considered a safe industry that preserves the value of money throughout time in light of various crises.

Although the real estate market is considered one of the markets that managed to overcome many crises, the current global economic crisis that continues to affect all countries raises fear among many people. 

And with the continuous waves of inflation that hit all fields, the most important question comes, what is the extent of the impact of inflation on real estate?

In a previous article, we talked about the economic crisis and some measures that will help you overcome it. Do not miss reading this article through the following link: Save your money during the inflation crisis. Steps to overcome the economic crisis.

In the last three years, the economy has been affected by many events and crises that led to a collapse in many sectors and an increase in the prices of many commodities and materials beyond expectations. 

Beginning with the Covid-19 pandemic and the quarantine that the world was exposed to, then the Russian war on Ukraine, which has passed a year since the start of the first military operations in Ukraine.

All these events greatly affected the shape of the economy in all countries and led to the occurrence of many imbalances in many sectors, the latest of which is the banking sector in America now, which witnessed a few days ago the second-largest bank collapse in the history of United States of America, after the bankruptcy of the American Silicon Valley Bank, which It was also followed by some collapses in other banks.

In today's article, we will try to help you understand the impact of the current economic crisis and inflation on the real estate market in Egypt.

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A simplified definition of inflation

Inflation occurs as a result of a sudden and high rise in the prices of any goods, whether it is a consumer or sustainable commodity.

Inflation directly affects the daily lives of citizens because it makes the purchasing value of the currency weak, which is not matched by an increase in wages, which leads to imbalance and imbalance.

The high rate of inflation raises fear among all people, as well as investors because inflation means that their investment-related funds will be exposed to shortages and declines, and with the slowdown in demand for their products, profits will also decrease.

How does inflation occur?

The phenomenon of inflation begins with the occurrence of any crisis that affects the price of raw and primary materials or basic materials that are used or relied upon in any industry. 

This is exactly what happened as a result of the Russian war on Ukraine, where the prices of building materials directly increased, and the cost of importing them became much higher, and this was followed by a rise in energy prices.

Coinciding with the movement of rising prices, the demand for real estate purchases increased, and this is because it constitutes a safer and more stable form of preserving funds so that it does not continue to lose value if it is kept in its liquid form.

In this way, the rise in the prices of production inputs such as iron and cement, as well as the increase in the purchase and demand for real estate, is a major driver for the rise in real estate prices.

Read this article for more details about real estate prices in Egypt. Will real estate prices go down in Egypt in 2023?

The effect of inflation on the real estate market

There is no doubt that the real estate sector, like all industries, will be affected by various political and economic crises. This comes as a result of its overlap with other industries and markets.

It is known that building materials such as iron and cement are considered basic and irreplaceable components, and with the high import prices of these raw materials, real estate prices will be affected accordingly. 

On the other hand, the rise in labor wages also leads directly to an increase in the price of real estate products. On the other hand, land prices also continue to rise, which increases the cost for real estate developers and puts them in confrontation with the need to raise the prices of projects.

Therefore, many real estate developers resort to owning a large land wallet that saves them from increasing land prices and provides them with the freedom to implement future projects. 

One of the most important real estate developers in Egypt is Talaat Mostafa Group, which owns the largest land portfolio, which amounts to about 53 million square meters.

Learn more about the story of the establishment of the Talaat Moustafa Group through this article, the story of a real estate developer, "Talaat Moustafa Group".

Is real estate a safe investment in light of inflation?

These economic conditions may raise doubts among investors or individuals about the effectiveness of their investment in the real estate sector during this current period. This fear is reasonable given that any individual thinks of the safest way to invest and preserve his money.

We would like to assure you that although real estate prices are affected by the surrounding events, it is considered one of the safest sectors that contain a small percentage of risks. This has been proven by the real estate markets over the years, especially the Egyptian real estate market.

The real estate market in Egypt is considered one of the markets in which the real estate bubble phenomenon does not occur, which makes your investment not threatened by the risk of a sudden collapse of real estate prices.

Read more about the real estate bubble through the following article, information that will interest you about real estate investment in Egypt and the UAE.

Learn about the factors that make investing in real estate a suitable choice despite the crises:

• Despite the low price of the local currency, the Egyptian pound, this opens another area for investment by exporting real estate. The Egyptian real estate market is an opportunity for investment from foreigners and Egyptians abroad, given that prices are low for them.
• The demand for real estate is always continuous, especially residential real estate, as the demand for real estate increased by 25%-30%, while the prices of building materials increased by 5%. This indicates that the demand rate exceeds the cost increase rate.
• The continuous rise in population growth and marriage rates in Egypt ensures the continuity of demand for real estate permanently.

Through the following article, you can learn more details about real estate investment and how the market developed in Egypt.

In Inland, we always try to provide you with all useful real estate information, always follow us. You can also call us directly at this number 01003366453 for any real estate consultation.