Buying a Property in Egypt

Why buy property in Egypt?

At just five hours away from the UK, Egypt is a world apart. A rich culture that is steeped in history is the backbone of this nation, and the reason why tourists have been flocking here for years. It was inevitable that the property market would follow hot on its heals, and now second-homers, retirees and investors are flooding Egypt's property market.

Attracted by the low cost of living and year-round sunshine, many buyers are ditching traditional home buying destinations in favour of Egypt – assured by promised rental returns. Sharm el Sheikh is renowned for its diving, El Gouna boasts a luxury marina and Hurghada has no less than eight golf courses planned – all factors which should keep the accommodation-hunting tourists coming back again and again.

In addition, the sheer youth of the market bodes well for positive capital appreciation, while the tax situation is extremely favourable. All in all, Egypt seems to tick all the right boxes for overseas property buyers.

Popular property locations

The two most popular regions with the tourists who flock to Egypt are the beautiful and sunny Red Sea coast; and the daunting, noisy and fascinating capital, Cairo. However, there are plenty of opportunities to own property across Egypt and with the speed of development in the past few years, there are likely to be a good number of new resorts opening up soon.

And, if you are talking about the Red Sea coast, one of the most important resorts is El Gouna. Located around 30 kilometres from Hurghada, this purpose-built resort offers everything the second-home buyer could wish for; 13 hotels, an 18-hole golf course, a marina, school, and hospital all compliment the expected shops, bars and restaurants. Prices for a one-bedroom marina apartment at El Gouna start from around £130,000.

Meanwhile it is Sharm el Sheikh that still has the monopoly on the tourist crowds. Known as one of the best diving locations in the world, Sharm is now attracting the masses as a year-round tourist destination. Sharm also has a vibrant old town area with more traditional restaurants and cafes to soak up the local flavours. Prices here have doubled in the past two years and, due to the fact that no more building licences are being granted, look as though they are going to continue to rise for some time yet.

More purpose-built resorts are being built along the coast of the Red Sea all the time, each one learning more from the experiences of the last so that the latest resorts are some of the most modern and well-designed in the whole region. Many of these resorts are around Hurghada, the coastal town that provides much of the focus for tourists in the area. More international flights are arriving into the airport all the time, and as the local infrastructure develops, so more tourists are attracted to the area.

Hurghada itself is one of the most important overseas property destinations in Egypt, and attracts lots of visitors of its own accord, rather than just being an airport transit town. The sandy beaches, warm waters and diving facilities, combined with the extensive golf facilities that are already in place and being constructed, make this a well-established destination in its own right.

Sahl Hasheesh is less than 20km from the international airport, and has been building high-end resort properties for the domestic and foreign investment markets for a couple of years. More new developments are planned for further along the coastline, and expect to see the name of Marsa Alam cropping up as an overseas property location in the near future.

Cairo, logically, is the focal point of the country in terms of business and international relations, and there is also a significant student population in the city attending the universities. Investment properties in the city can be very profitable, though they are more likely to stay as investments rather than being used as holiday homes. For all the proximity to the Great Pyramids and the ease of access to the city, Cairo is not exactly a place to spend a relaxing break – the bustling, loud and occasionally dirty city can be stressful for foreign visitors.

Residents of Cairo escape to Alexandria for a break from the city. The ancient capital of Egypt and its largest seaport is developing into a modern resort for the domestic tourism market in Egypt, which means that the international crowds are likely to follow soon.

Finally, there is extensive construction of hotels and resort facilities in the southern city of Aswan, on the banks of the Nile. The attractions of the famous dam across the Nile, and the archaeological relics of this ancient city are bringing tourists in, and development here is likely to continue for some years.

The buying process

Once you have decided on a property you will be required to pay a holding deposit of ten per cent. Before you hand over any money however, it is imperative that you follow the following five basic steps. Firstly you must get your solicitor to check the registration status of the property – a drawn-out process of around four months, which is executed by examining the title deeds. Despite registration being a legal requirement, only ten per cent of Egyptian homes fulfil this requirement, so if you are buying a resale home it is best to be prepared for bad news at this stage. Secondly, your lawyer will need to ascertain whether there are any outstanding debts registered against the property. If there are, again, it is best to simply walk away.

The third step is to ensure that all real estate taxes levied against the property are fully paid and up to date, while the fourth is to review and sign the sales contract. Be aware that this contract is not legally binding unless it is bilingual. Lastly you must register the purchase through the courts – a process which costs around £500.

Legal issues

As mentioned above, obtaining a property that has clean title can be difficult. In the past, many property transactions simply took place between the buyer and the local landowner – without the necessary paperwork to determine who the new owner was. Thousands of other properties were handed down from generation to generation meaning that, in some instances, around ten members of one family could stake a claim in the property’s title. In order for the sale of such a property to take place all ten members must therefore agree. In addition, the registration process was expensive, resulting in many transactions taking place under the table. This cost has recently been reduced, however, from 12 to three per cent so buying a fully registered home should get easier as time goes on.

You will also need to establish whether your property is freehold or leasehold. For the majority of new-builds in resort developments it is likely that they will be leasehold, with a 99-year lease. Some older resorts may only offer 50-year leases however.

Financing a property in Egypt

The mortgage industry in Egypt is still very much in its infancy, and you may simply find it easier to raise finance in the UK by remortgaging your own home. Some Egyptian developers will provide loans in order to encourage you to buy their particular properties, but these tend to be over a limited period of time. If you do decide to go down this route, however, be aware that this may tie you in to the development should you wish to sell your property – unless you can persuade your buyer to take over the loan as well.

Egyptian banks may also be able to provide a loan, but if so, it is likely to be quite a high rate and, again, over a short period. Some western banks based in Egypt may be in a position to offer you a euro based loan, but these tend to be few and far between.

Property in Egypt: Fees and taxes

New rules in Egyptian property law have made it much easier to both buy and sell property and, if you buy and sell in the right way, you may also be able to avoid income, inheritance and capital gains taxes. For example, buying through a company and placing ownership in a trust, are options well worth considering.

When purchasing, expect to pay around 1.5 per cent in estate agents fees. Some agents may claim not to charge this, but it will simply already be included in the purchase price. You will also need to budget for solicitors fees of around 2.5 per cent and another 2.5 per cent for government purchase taxes.

Egypt does have a double taxation treaty with the UK however so, if you are planning on renting your Egyptian property out, it is advisable to employ a British accountant to limit tax liabilities on any rental income received.

Visas, residency and work permits

In order to enter Egypt you will need a valid 10-year passport, with no less than six months until expiry, and a tourist visa – which can be obtained at the port of entry for around £15, and is valid for up to three months. It is possible to renew this visa for a similar amount of time without leaving the country, by applying at the Mugamma Immigration Office in Cairo, and transferring US$180 (£90) for each additional month that you wish to stay into a local bank.

In order to purchase a property however, you will need to obtain a residence visa. This is relatively simply to obtain, and is granted for a period of either three or five years. Be aware that a residence permit will only enable you to purchase up to two properties, with a maximum of 4,000 square metres between them – so should you wish to expand your portfolio you will need to set up an Egyptian company.

New-build versus resale

As mentioned above, the greatest problem with purchasing a resale home in Egypt is ensuring that it has clean title. As a result, many buyers only opt for an older home when the purchase is a true labour of love. For example, if you have your heart set on a city pad, then you may have no choice but to patiently sit out the red tape.

Meanwhile, if it’s a beach home you’re are after, there is a good selection of new homes available. New-build homes also have the added advantage of being situated on a purpose-built development. Buying in such a resort not only offers a wealth of on-site facilities and amenities, it increases safety. In addition, unless you are a confident Arabic speaker, you may simply find everyday life easier in a world where English is spoken. Shopping in the local towns and markets should be an enjoyable experience – yet if you had to navigate it on a daily basis in order to get a pint of milk you may find it rather exhausting.

Egypt's property investment potential

As with any emerging market, there is no guarantee of positive capital appreciation in Egypt. Having said that, for the few years that it has been on the international radar, the country does boast a successful track record. In fact, annual growth of between 20 and 30 per cent is often cited.

In addition, low entry prices can mean that investors are able to enter the Egyptian market on a cash basis, therefore saving thousands of pounds per year in interest rates. Rental potential is also good, providing you chose wisely, as Egypt has a strong tourist trade thanks to its ancient culture and excellent diving. Easy access, a good climate, increased inward investment and a favourable tax regime complete the picture. Therefore, the ‘guaranteed’ rental returns promised by many Egyptian developers are quite believable – just ensure that the asking price doesn’t over-compensate for these in the first place.

Health and education

You may be required to produce proof of vaccination against certain diseases, such as yellow fever and cholera, depending on which country you enter Egypt from. However, even if you are arriving directly from the UK, it is advisable to have jabs for typhoid, paratyphoid and, for those travelling into Upper Egypt, hepatitis B, before arrival.

Wherever in the country you are travelling, it is imperative that you take out adequate travel and health insurance – especially as there are no reciprocal healthcare agreements between Egypt and the UK. Egyptian medical facilities are not up to western standards, and, while it is possible to receive private treatment you will need to be able to produce a guarantee of payment from your insurance company first.

There are two recognised International British Schools in Egypt, however both of these are situated in Cairo. The large resort of El Gouna on the Red Sea Coast also boasts a co-educational international school which is based on the English curriculum. Entry is based on a successful interview and examination results.

Transport

Both British Airways and EgyptAir operate regular direct services between Heathrow and Cairo International Airport. Once in Egypt, it is possible to get connecting internal flights to the resorts such as Hurghada. If you wish to stay on terra firma, however, there are a range of options available to you. All of the large towns are connected by rail, with services both frequent and efficient. Although be advised that you will need to book seats in advance.

The road network is also well developed and it is easy to hire a car, complete with driver, from all of the major tourist destinations. Just one word of caution – agree the fare before you get in! The cities offer bus, tram and metro services. However, metered, air-conditioned taxis are perhaps the best mode of transport for foreigners that don’t speak Arabic. Once again, agree the fare before you start your journey.

However you decide to travel, be aware that certain areas of Egypt still require permission from the security authorities before you can enter. All British travellers should consult the Foreign and Commonwealth Office before setting off.

And finally…

Real estate agents in Egypt are not regulated, so it’s imperative that you do your homework before buying. It is also important to realise the sheer youth of this market – many agents and developers haven’t been around for long, so there may not be any previous work to examine. There is also no guarantee that the developer won’t go bust – hence your need for comprehensive legal advice. It is your solicitor’s job to ensure that the development has a comprehensive bank guarantee should the worst happen.

The sheer scale of building currently underway is also something to consider – especially if you are buying solely for investment purposes. While rental opportunities are currently good, there is nothing to say that this short-let market won’t become saturated when all of these developments reach completion. The recent bombings in Sharm el Sheikh may also have an impact on tourism.

Finally, upon application of a residence permit, don’t be shocked if you are asked to produce a certificate confirming that you are free of HIV.

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