Why Invest in Egypt?

With strong long-term economic growth, decreasing inflation, and an upsurge in both demand for short-term rental accommodation and second properties, Egypt is proving that it is more than just the home of ancient culture and the Pyramids. Among the many factors joining together to make Egypt a hot prospect for the property investor is the record number of visitors that the country is attracting.

Rapidly Increasing Tourism

The number of tourists in Egypt almost doubled between 2001/02 to 2005/06 and Egypts prominence in the tourist market is set to continue with progress towards a further doubling - to 16 million visitors - by 2014.

Revenue from tourism has grown hand-in-hand and in the last financial year tourist income stood at $7,235m, nearly 10% of the countrys GDP. The World Trade Organisation (WTO) has projected that tourism growth will continue at a consistent rate of 6% each year.

Of the many examples of anecdotal evidence of this growth was a recent article in The Times newspaper. The German travel group TUI (before its proposed merger with First Choice Holidays) reported that its customer numbers had risen by 5.1% and specifically that: "summer bookings to Spain had declined while Greece and Egypt were up."

The successful tourist market has been assisted by the high-profile activity of the Egyptian Tourism Authority, which has included a big marketing campaign in anticipation of this years northern winter season and, following up its success with the 'Red Sea Riviera' campaign, 'The Gift of the Sun' initiative has been launched across Asia, Europe and North America.

This initiative was backed by the Egyptian Minister for Tourism himself and was yet another sign of the pro-active stance taken by the Egyptian government in promoting tourism, along with developing the infrastructure of resorts and training the tourist workforce, which represents 12.6% of the labour force available in Egypt.

Investment Hub

Furthermore, Egypts Prime Minister has underlined the intention for Egypt to become an 'investment hub' for foreign investors, particularly in major infrastructure sectors. Meanwhile, at a recent 'Middle East Travel and Tourism summit', the importance of private-public partnerships was underlined (with particular reference to Egypt) to an audience of over 400 leaders of the international tourism industry.

As a result of this concerted effort, the appeal of Egypt has widened away from its traditional, historical, lure as 'the land of the Sphinx' to being recognised for its varied tourist appeal. It is becoming known for city breaks in Cairo, for pursuits such as diving in its popular Red Sea resorts, and for celebrity golfing holidays at resorts like The Cascades in Soma Bay. The Cascades course was designed by golf legend Gary Player and has been ranked in the top 10 courses in the world by the readers of Golf Journal. It is located just 45 minutes from Hurghada International Airport with direct flights under 4 hours from the UK. In the context of an exchange rate stage stabilisation and tightening of monetary policy, inflation fell dramatically to around 4% in 2005 from 18.1% in 2004, and came in under 4% the following year.

In the context of an exchange rate stage stabilisation and tightening of monetary policy, inflation fell dramatically to around 4% in 2005 from 18.1% in 2004, and came in under 4% the following year. Meanwhile the growth in GDP has nearly doubled from just over 3% in 2002/03 to over 5.5% in 2006/07. In order to maintain the current favourable conditions the government has planned growth to be sustained by at least 6-7 percent, and that total investment will need to reach about 25 percent of GDP, well above recent levels of around 18 percent of GDP.

Economic Feel-Good

The 'feel-good' factor engendered by upward economic trends and tourist numbers has inevitably had a positive knock-on effect on real estate. Investment in Egyptian property is offering great opportunities for purchasers especially at this early stage of the vibrant fledging market. There is increasing tourist demand for short-term rental accommodation in the resort areas on both the Red Sea and Mediterranean coasts and property investors have enjoyed the best rental yields in the country from their activities here.

Meanwhile, as more overseas buyers seek holiday homes and second homes in these resort areas the second home re-sale market has started to show profit potential over and above the initial capital outlay. Egypts proximity to the European mainland and renewed tourist infrastructure mean that this market keeps on growing as holidaymakers see the potential for owning another property in an attractive, exotic location.

Aside from the resorts, the majority of real estate investment takes place in the major cities such as Cairo and Alexandria where overseas property investors are overseeing the development of luxury residential areas and consequently generating strong international interest in the market. No wonder, as these major cities are currently attracting as much as 25% annual capital growth. The demand for property on the coast and in the cities, where there is a shortage of accommodation, and the subsequent ever-widening profit margins are set to continue due to a whole range of factors and benefits. The availability of infrastructure, low cost of living (therefore low costs of property management and maintenance), low prices for the investor and the introduction of mortgages for foreigners in Egypt, have all combined to make conditions more than favourable.

Tax Haven

Furthermore, the abolition of a bundle of red tape measures relating to tourist activity, an easy-to-follow tax system and the absence of any inheritance or capital gains tax for foreigners are added incentives to Egyptian property purchase. With all of the factors coming together, underscored by the most stable economic conditions in years, it is hardly surprising that the increasingly popular holiday destination of Egypt has become a natural magnet for foreign real estate investment.

The availability of infrastructure, low cost of living (therefore low costs of property management and maintenance), low prices for the investor and the introduction of mortgages for foreigners in Egypt, have all combined to make conditions more than favourable.

SOURCE: Obelisk International