March 2008

I have been asked for my feedback on some other emerging markets we do not currently offer, so I thought I would briefly share my views on a current emerging market:

EGYPT

Egypt seems to be a hot market at the moment, with apartments close to the beach/ Red Sea from approx £15,000.  This looks like an excellent investment for many reasons, as the price is low for UK/ Western European investors, the weather in Egypt is very warm and there are many interesting historical sites.  So why has Fresh turned down developments here?

Resale Market – from Sharm El Sheik to Marsa Alam there are 1,000s upon 1,000s of new apartments under construction.  Is demand meeting supply?  We are not sure.  If you need to re-sell your apartment in the next 2 years or 5 years or 10 years, who is there waiting to buy?

Poverty – This is an issue every emerging market faces, but Abdel-Hameed Nawar (2007) who wrote the manuscript “From Marina to Kom-Ombo: A Note on Poverty in Egypt,” states that “about 44% of the Egyptian population are in the range of extreme poor to near poor”.  Also with the average salary in the capital city Cairo being approx £8,000 per year, how can a regular Egyptian afford these coastal properties?

Human Rights – Local and international human rights organisations, including Amnesty International and Human Rights Watch, have criticised Egypt’s human rights record as poor.  According to HRW’s 2006 report, the most serious human rights violations are routine torture, arbitrary detentions and trials before military and state security courts.  Also discriminatory personal status laws governing marriage, divorce, custody and inheritance which put women at a disadvantage have also been cited.

Tourism Growth – The WTTC states that tourism demand in Egypt will grow 7.9% in 2007, but then drop to 5.4% pa for the next 10 years to 2017.  This is lower tourism growth than Albania!

Discounted Holiday Packages – with some All Inclusive 5 star holiday packages to the Red Sea from £299 for a week, including flights, food and accommodation, how can a decent rental yield be achieved?

We will be keeping an eye on the Egyptian property market, but with normal existing 2 beds Ive seen for sale for around £20,000, we are not too sure the current off plan developments offering similar apartments from £35,000 are really worth it.

Large amounts of FDI are coming into Egypt, but other than large corporations and hotels, who will really see the benefits?