Details

Stimulating demand essential component in real estate developers’ strategies in 2019

Al Mazaya Report:

 

-Egyptian property market needs efficient financing tools; stable construction material prices

The need to find tangible solutions to real estate price fluctuations lies at the heart of property developers’ concerns, discussions and plans during the current year. The main objective is to restore market momentum and attractiveness through effective mechanisms conducive to developing and managing real estate projects that secure the biggest possible demand at the lowest possible costs and the highest possible returns.

Al Mazaya Holding’s weekly real estate report said that property developers are currently looking for new mechanisms and tools capable of addressing the factors influencing supply and demand forces in the region, taking into account the liquidity levels, prevailing prices, geopolitical circumstances and economic conditions witnessed by the region in particular and the entire world in general.

According to Al Mazaya report, influences on the real estate industry and prevailing prices differ from one country to another and rather from one market and location to another; and therefore, plans should differ accordingly.

Real estate investment is faced with various challenges in decision-making regarding the timing of increasing or correcting prices. While seeking to address such challenges, one has to take into consideration the circumstances and external influences bearing on the sector, especially oil prices, political stability, flexible legislation that can survive market fluctuations and effective government spending plans that can reflect positively on real estate prices and prediction mechanisms.

In this regard, Al Mazaya report said that the Egyptian real estate market is a promising one. However, it needs a long time to develop effective solutions to address price hikes and declines owing to accumulated challenges, primarily the fluctuations in energy prices. The government plans to remove subsidies on petroleum products likewise often have a bearing on building material prices, which on their own play a significant role in determining property prices in such a large market.

The report added that ensuring stability in building material costs in Egypt is likely to reduce prices, noting that any price changes would push towards increasing or decreasing demand accordingly.

In addition, the development of efficient funding tools and streamlining financing procedures will mitigate the impact of price increases over the medium and long terms. Also, stabilising luxury housing units’ prices will reflect positively on the prices of other real estate products.

The realty market in the UAE is witnessing more mobility aimed at supporting prices and surviving volatilities with more investments and comprehensive financial and economic stimulus plans during the current year, which come as an integral part of well-thought-out plans and strategies tailored to help the country continue to maintain its status as a leading investment hub.

Al Mazaya report says that foreign currency exchange rates play a role in the current decline in foreign investments, as more than 40% of investors opt for foreign currencies in real estate dealings. In the meantime, increasing mortgage trends help maintain market mobility.

The report adds that the positive investment environment in the UAE plays a role in surviving challenges and price pressures, with the real estate industry managing to ensure investment returns of at least 7% and an increase in capital value by at least 5% per annum. This is coupled with continuing government spending on infrastructure projects and expansion in urban development- which are all positive factors conducive to securing economic growth rates of not less than 3.5% during the current year.

In Saudi Arabia, Al Mazaya said that the expansion in the supply of real estate products that are not in demand by investors and the lack of effective plans to draw more real estate investments have led to further declines in real estate demand.

It is noteworthy that the next period will witness a focus on real estate projects that offer distinctive products at good prices, while real estate products with less attractive specs will face further declines, taking into account that individual demand on housing units will continue to rise against a decline in the investment trend due to the success achieved in curbing speculators and driving them out of the market, which led to significant price corrections.

It’s noteworthy that housing and villa sales fell by 33% during Q3 2018, with the value of deals down by 15% and property prices falling by 30% as a result of the ongoing economic structure across all sectors, primarily the real estate platform.