On the beach
probes into the holiday homes of the rich at play as the tap turns on the booming business of seaside property development
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As with so many things in Egypt, however, close inspection of the real estate landscape reveals sharp differences with the West. To begin with the deliberate policy of developing the Mediterranean coast was a government initiative. The government gave the green light and property developers jumped in at the new investment opportunities. Smart new apartment blocks designed for holidaymakers sprang up. Today, the process is driven by giant property developers. Get-rich-quick investors followed suit
Instead of making a quick pound, though, many wealthy Egyptians are investing in buying or building a holiday home by the sea. For the rich and socially mobile it is an absolute must. The Mediterranean and Red Sea resorts are emerging as magnets for property developers and real estate agents are doing brisk business by the sea. Foreigners, too, are now keen on owning property in Egyptian seaside resorts.
Needless to say, nobodies need not consider this as a feasible option, though. Long stretches of the North Coast have emerged as hideouts for the rich and famous.
The property development business will feature few non-celebrities. The same familiar faces seem constantly to pop out in the vicinity of these plush resorts. The "new money" seaside mansions with their neatly- mowed blossoming gardens stand in sharp contrast to the overgrown gardens filled with litter of the "old money" villas of yesteryear in Zamalek, Heliopolis or Maadi. The new villas cannot compete with the old in architectural splendour, however, they do reflect the spirit of the age.
Milad Hanna, the self-styled "Mayor of Marina", tells the tale of the booming real estate bonanza in the North Coast. "There is no such thing as the 'Mayor of Marina'. I happened to be one of the first to invest in a holiday home in this stretch of the Mediterranean coast west of Alexandria and I do happen to know a lot about its earliest beginnings and newcomers came to me for advice," Hanna clarifies.
As with so many things in Egypt, however, close inspection of the real estate landscape reveals sharp differences with the West. To begin with the deliberate policy of developing the Mediterranean coast was a government initiative. The government gave the green light and property developers jumped in at the new investment opportunities. Smart new apartment blocks designed for holidaymakers sprang up. Today, the process is driven by giant property developers.
Get-rich-quick investors followed suit. And, so did more modest but no less ambitious holidaymakers. "These days, you do not have to be a millionaire to own a descent villa with a swimming pool overlooking the Mediterranean," Hanna notes. "The extremely wealthy prefer to spend their vacations in Europe. They have the money to do so, but that does not mean that they will not invest in a lavish mansion on the North Coast," he explains. "Sidi Bishr, Alexandria, used to be the haunt of the wealthy. Today, the seriously rich are moving further west along the Mediterranean coast," Hanna observes.
Much had been made in recent years of private-public partnerships. Many of the Mediterranean and Red Sea resorts stand testimony to such partnerships. "The government, for instance, constructs an airport with scheduled domestic and international flights in Marsa Alam or in Alamein, and property prices in the area soars. This is how new tourism destinations are created and sooner or later integrated communities are founded," explains Heba Bilal of Palm Hills Developments, one of Egypt's most important property developers. Bilal cited the example of Hacienda Bay where Palm Hills is developing a golf course on the North Coast. She says that the development of tourism in the North Coast from the perspective of Palm Hills is inextricably intertwined with the hosting and promotion of international sporting events. "We do not focus narrowly on exclusive private residential projects," she elaborates. Accordingly, mega-shopping malls and cinema complexes go hand-in-hand with residential tourism complexes.
"Palm Hills is expanding its real estate projects to merge residential housing with the tourism industry of the North Coast," Bilal stresses. "All-year-round tourism, international tourism -- selling Egypt as an attractive tourism destination -- that is also our goal."
Palm Hills Development contracted Nicklaus Design, the world's leading design firm, to create the 27-hole golf course for Palm Hills spread across 275 acres in 6 October City in the vicinity of the Pyramids and a stone's throw away from Smart Village, Egypt's financial, business and IT hub. The 6 October City Airport also buttressed the success of the Palm Hills Development project on which the seaside projects are modelled with local modifications.
A basic law of economics holds that there is no such thing as a free lunch. The growing economic prospects of Egypt have created an atmosphere of optimism and a rosy milieu conducive to the development of exclusive residential tourism complexes in far-flung parts of the country -- Aswan, Ain Sukhna, Hacienda on the Mediterranean and El-Gouna on Red Sea.
According to the 2008 Index of Economic Freedom, "Egypt made the biggest worldwide leap in economic freedom over the last year, gaining four percentage points, the largest improvement of any country." Egypt, the report noted, ranked the 85th freest economy in the world out of 157 countries surveyed. An inauspicious beginning, but the country has come a long way from the socialist heritage of its past.
Those in the real estate business had a sumptuous feast when Egypt's economic elite began investing in vacation homes on the North Coast.
Not so fast, property developers. As the effects of the global credit crunch and higher food and fuel prices work through the economy, it is reasonable to assume that the property and real estate sector would be adversely impacted in Egypt.
So does the North Coast's booming property sector face the prospect of supply catching up with demand in the years to come? So far there is no obvious decline in contract signings.
Many experts believe that any talk of a turnaround in the sector is premature. Yes, we are beginning to see some erosion in sales of existing holiday homes in certain sections of the North Coast. However, there is a boom in other parts. Project delays and market management problems inevitably slow down the process.
Overseas investors are helping to drive the continuing rise in property prices. To be sure, not all real estate businesses are doing well. "The new real estate boom along the Red Sea and Mediterranean [North Coast] resorts are designed to let you relax, unwind and feel free and refreshed. Most are close to entertainment and shopping malls," contends Gamal Zayda, editor of Al-Ahram's property supplement. "Now we are in a new phase," notes Zayda.
Many companies are sniffing around for new opportunities on the North Coast. The success of these companies also underlines the fundamental strengths of the sector in Egypt.
According to Zayda, some of the most obvious beneficiaries of the holiday property boom and most active property developers in Egypt include the Sawiris family with projects such as El-Gouna on the Red Sea; Al-Kharafi in Marsa Alam also on the Red Sea but further south; Mahmoud El-Gammal in Hacienda, the Mediterranean; Hassaballah El-Kafrawi; and Emaar of the United Arab Emirates with a turnover of some $50 billion and which is currently the biggest property development company in Egypt today and caters for the top end of the market.
Taken at face value, the industry has been a roaring success. A gigantic jump in vacation home sales on the North Coast in the past 15 years enriched the country's economic elite and expanded employment opportunities for thousands of workers in the construction and tourism sectors.
"Few Egyptians have faith in the stock exchange and they find it far sounder to invest in property and real estate. There is a surplus in national savings and possessing a holiday home by the seaside is not only a mark of social distinction, but a lucrative investment. Moreover, the banking system is not as developed as in some other oil-rich Gulf Arab or Western countries," Zayda explains. "There is also the natural tendency towards the maximisation of profits," he notes. "There are those who prefer to sell properties to foreigners, to a British national, for example who would pay in pound sterling, instead of doing business with a local client." "There are properties with private beaches, unheard of in many Western countries, with special health spas, gymnasiums and other such facilities. Some of the best bargains are being sold like hotcakes to foreigners who seek sun, sea and sand," Zayda notes.
He says that some seaside holiday homes are now sold for LE9-10 million and others for LE4-5 million. People who have that sort of money, he claims, are not ashamed to flaunt it. "Sure, there should be full accountability," Zayda stresses. But, that is an entirely different subject matter.
There are several factors sparking these debates: one is that there is growing public resentment among the have-nots. The exclusive residential complexes are glaring testament to the yawning gap between rich and poor in Egypt today. Less prosperous buyers who are unable to put up huge deposits on property by the Mediterranean and Red Sea most certainly do not bide their time. The sad truth is that they have no chance in hell to own a fancy chalet with panoramic views on the Mediterranean or Red Sea. Even more galling is that those who do own seaside property in Egypt, in all probability also do own property in Malaga, Marbella or some other place on Spain's fabled Costa del Sol.
The bottom line is that this new marketplace is not exactly levelling the playing field.