After offering the 27% certificates...what will happen to real estate prices during the coming period?

The National Bank and Banque Misr announced the offering of two high-interest one-year certificates, the first with an annual return of 23.5%, disbursed monthly, and the second, with an annual return of 27%, to be disbursed at the end of the period.

Real estate market

But how will the offering of these new certificates affect the real estate market, especially since the first entitlement in the two one-year certificates that were offered in the National Bank and the Bank of Egypt on January 4, 2023, with a return of 22.5% disbursed monthly and 25% annual return, has begun.

Ayman Sami, head of JLL Egypt Real Estate Consulting Office, said that the impact of the new certificates on the real estate market will not be significant, as these certificates are expected to attract the savings that will come from the old certificates.

He pointed out that the impact of the new certificates on real estate companies will be relative, adding that the demand for real estate is already high, in addition to that a citizen who needs a housing unit will buy it regardless of the price or investment opportunities found in the certificates.

  The opposite is true. The client investing in bank certificates will prefer them at the present time, especially if he wants a monthly return without any risk.

He continued: "Real estate prices are constantly rising due to the high cost of implementation as a result of the high prices of building materials and the continuous increase in the dollar."

The head of JLL Egypt Real Estate Consulting Office explained that companies are expected to reduce the size of the supply of units until the market stabilizes again.

He stressed that the coming period will witness rental activity as a result of the rise in residential unit prices, in addition to secondary market activity due to the availability of units that are lower in price than the new units.

High prices of building materials

In a related context, Engineer Fathallah Fawzi, Vice President of the Businessmen Association and Chairman of the Association’s Building and Construction Committee, said that the Ministry of Housing has implemented a number of measures, facilities and incentives to mitigate the effects of the challenges facing real estate developers and real estate companies, after the prices of building materials rose significantly.

Real estate market

He added, during his interview with the “Bab Al-Asimah” program on the “Ten” channel, that most companies achieved their “target” one and a half or two times as a result of the entry of new investors and the intense need for housing in the real estate market.

He continued, “There is a very large group that has entered the real estate market despite the significant increase in the price of residential units since the flotation occurred in 2023, and until December 2023, by 80% of their price.

  Despite the high price, there are real estate companies that have achieved a profit of 200% of their real estate target, and new companies have entered the real estate market despite the presence of significant inflation, the floating of the Egyptian pound against the dollar, and the insane increase in residential units.”

Flotation effect

He pointed out that the flotation that occurred in 2023 greatly affected building materials, especially iron and cement, in less than 48 hours of this flotation, and prices rose significantly, as the rise in cost prices along with the price of the property or residential unit was not as rapid as for building materials.

He pointed out that real estate developers and real estate companies were adding a 5% increase to the unit price every month in the first months of 2023 in order to absorb the high cost of building materials for residential units and the large inflation after the flotation that occurred in the real estate market.

He concluded: “If there is a decline in the price of the currency, there will certainly be an increase in building materials, and consequently real estate prices will rise in 2024, and if there are no increases, the real estate market will be greatly balanced.”