Despite the decrease of construction materials prices, there is no significant decline in the price of real estate properties.
It is reported that the price of steel decreased by an average of EGP 600 to EGP 4,600 per tonne, which is EGP 1,000 lower than its price last year. It is also lower than the price in 2008 which is EGP 8,000 for one tonne of steel. Back in 2008, the average price for a square metre of real estate property in 2008 was EGP 1,500. Major steel producers in Egypt has reduced their prices this January for the second consecutive month, Ahram online reported.
But despite the drop of steel to EGP 3,600, the average property price per square meters has increased to EGP 2,500.
“The average price of a square metre for a residential unit in government projects is EGP 4,000 while the average price of a square metre of a residential unit in a private company project would cost EGP 5,000,” executive director of the Chamber of Metallurgical Industries Mohamed Hanafy said, according to Daily News Egypt.
He also added that because steel only comprise around 7-8% of the total cost of construction, it will have a lesser impact to the value of properties since there are more important factors that can affect it. Meanwhile, cement comprises only 8% of construction cost and 3% of the unit price.
A major factor for the increased prices of properties is the limited supply of land as well as the price of lands as explained by the Head of cement companies at the Federation of Egyptian Industries (FDI) Medhat Stephanos, adding that only 30% of the profits are tied to actual costs.
Meanwhile, it is predicted that the upwards trend of Egypt's real estate will continue since Egyptians purchase property as an investment and as a way to safeguard their savings.
“Egyptians prefer purchasing property, even if they will not use it, than putting their money in a bank or investing it in the capital market,” said Amr Adly, a political economy scholar at the Carnegie Middle East Centre.
