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Thursday, 02 August 2007 14:39 |
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 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.
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.
Major cities are currently attracting as much as 25% annual capital growth |
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. Egypt's 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.
Egypt: Purchase Process
Below is the standard purchase process in Egypt, and issues that may affect that purchase:
- Even though many Egyptian properties are unregistered, registration is an essential pre-requisite to a purchase.
- Foreign
ownership is limited to two residential properties per family, with a
combined area not exceeding 4,000 square meters or within a historical
site. (There is a resale restriction of five years , although
exceptions can be applied for)
- Registration is complete after inspections are made and any payment of taxes and/or fees is made.
- A holding deposit is payable once the property is decided upon; that will take it off the market and start the contract process.
- It
is advisable to have a lawyer conduct searches and advise on the
legality of the purchase, even if the property is brand new and being
purchased from an established developer.
- Mortgage
products are available in Egypt although an overseas investor may wish
to consider mortgage options outside of Egypt too.
Costs of a standard property purchase in Egypt include the following:
- Property registration and legal fees for conveyance total around 6%.
- Stamp Duty is payable on property at 3%. However, in Egypt there is no stamp duty or capital gains tax payable on real estate.
- British residents will avoid inheritance tax on any Egyptian properties passed on to relatives and partners etc.
- The buyer pays a nominal inspection and measurement fee of around 65 Euros.
- Tax on income from the property amounts to 20% to 22%, an alternative VAT.
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