BUYING PROPERTIES is a British obsession; house prices, mortgage interest rates and holiday homes are hot topics of conversation. Our love of bricks and mortar has launched 1000 books, newspaper articles and TV shows.
Divers are increasingly tempted to stray beyond the traditional British buying destinations of France and Spain to consider properties in places with great diving, such as the Red Sea. So how advisable is it to buy in a developing market such as Egypt? What are the possible benefits and pitfalls of owning your own piece of diving paradise?
Ask most British people what they think of Egypt and they'll probably mention pyramids, desert, the Nile and some fairly dodgy security issues.
People who have actually visited the country will have a different impression; of the heat, of the slightly chaotic but functioning infrastructure, and of a country that is overwhelmingly safe and welcoming.
British divers are very likely to have visited the fabulous dive sites of the Red Sea at least once; we have a positive relationship with the place and an ongoing motivation to return.
We are prime candidates for the newly developed crop of Red Sea Riviera properties, which are built to European standards and targeted at people who can afford a holiday home.
If you're considering the possibility, now is precisely the right time to investigate the market. The experience in Dubai shows that once the investment to develop has been committed by large companies, there is a relatively short window of opportunity for individual buyers to act before property prices escalate steeply.
Although, of course, there is no guarantee that Egyptian properties will follow the same pattern as in Dubai.
Investment in Egypt is being made in two areas, the Mediterranean coast and the Red Sea Riviera. Divers are likely to be familiar with Sharm el Sheikh, Hurghada and El Gouna, and most Red Sea developments are in or reasonably close to these locations.
Sharm is a renowned international destination where world leaders come together. It's considered the second capital of Egypt and it currently has 120 five-star hotels. The President of Egypt has a holiday home here.
With Ras Mohammed National Park to the south and Nabq National Park to the North, properties in Sharm are a limited resource sandwiched between two protected areas. Beach properties are at a premium.
Sharm airport is expanding, enabling several million more people to visit each year. RyanAir is talking about starting low-cost flights here in 2008. The local economy is thriving with services springing up to meet the new influx of wealthy visitors, and this includes companies specialising in letting out the properties of holiday-home owners.
Investment in the Sinai has already spread all the way up the eastern coast to Taba. Every time I visit, new infrastructure has been built.
Hurghada has also become a popular destination, with airport expansion and carriers such as BA now providing direct flights. El Gouna to the north provides a perfect example of the kind of coastal development taking place here. There is more coastline here than on Sinai, and so less pressure on land availability.
There are planned developments from as far north as the Zafarana Resort, which is closer to Suez than it is to Hurghada, and south to Marsa Alam.
The luxury developments of Sahl Hasheesh and Serrenia are both within easy reach to the south of Hurghada.
Thirty-seven miles to the north, an ambitious state-of-the-art development is taking place at Gamsha Bay, with investment from companies that have successfully developed properties in Dubai.
Newly built or off-plan one-bedroom properties in Hurghada currently start at around ?17,000. In Sharm, the cheapest available is ?20,000. Expect to pay a far higher price than this in the more prestigious developments, where a two-bed flat can cost ?150,000.
Properties are generally priced by square footage and location, so you pay more for sea views and proximity to the beach. You may be able to find a variety of more competitively priced properties through resales direct from the owners, although this may require some groundwork to develop local contacts.
In Egypt, there is no such thing as an independent property survey, so no way of objectively ascertaining or fixing the value of a property. Basically, it is worth whatever people are prepared to pay for it at the time. It's very much up to you to check out the state of the market and the prices being paid.
You need to add legal fees to the headline costs, plus any arrangement fee for the agent, which can be 1.5%.
Look out for annual service charges such as pool or grounds maintenance - these should be apparent in your contract of sale. Also check how much you'll be charged for gas and electricity. If these come through an agent, they will invariably be inflated to above the locally paid rate.
On top of this, you will need to be able to furnish the property and keep it in a good state of repair, especially if you're planning to let it. If you sell, expect to pay around 2% to an agent.
So don't forget: always take professional legal and financial advice before considering a property purchase!
There is pretty much no such thing as a mortgage in Egypt. People either use existing savings or borrow against their UK property. There are specialist mortgage companies, often contactable through the developer or agent, who will be more than happy to assist.
If you're buying off-plan, the developer will typically expect you to pay a 50% deposit, with further payments scheduled throughout the build, and the final 5% due on completion. You can, however, choose to negotiate your own contract terms and hold back a larger sum to incentivise the developer to stick to the schedule or to introduce penalties for delays. This contract will have to be drawn up and negotiated by your lawyer.
Either way, you need to be certain that you have access to the sum of money involved in the purchase before entering into any agreement.
The big money for estate agents is in selling off-plan properties in yet-to-be-built developments, so don't be surprised if the information you receive is heavily weighted towards these properties.
Billions are being spent on, for example, the golf resort of Sahl Hasheesh and Serrenia, a marina designed by Norman Foster.
The majority of properties on offer, for at least the next five years, will be newly built, and at present there's very little in the way of a resale market.
This is something to bear in mind when considering the length of the commitment that you're making; with so many spanking new properties on offer, why would somebody buy your (now less-than-perfect) flat or house?
As the property market matures, the resale of European-standard properties is likely to become a more significant area of activity, but at present it is certainly not the focus of
the estate agents.
Investment opportunity: For some, the Red Sea property market represents a great opportunity for rapid capital appreciation combined with regular income from lettings. Most expect to make a 5-10-year commitment.
Holiday home: Your property may be an ideal resource that you and your family/friends can use for a few weeks every year, with some income from rentals in between. However, if you factor in how cheap it is to stay in a 5* hotel out here, you probably won't be saving money on your holidays and you've committed yourself to visiting the same place every year.
Down-sizing or retiring and moving to Egypt: Sell your UK property, buy your Egyptian property and live by investing or earning interest on the spare money! Residents' visas are easy to come by and there are minimal restrictions on foreigners living in Egypt.
Probably the best reason to buy, ultimately, is that you love the place and would like to spend more time there.
There is limited scope for 'holiday lets' of a week or two, partly because there are many 5* hotels with very good deals and lots of travel agents selling flight-plus-accommodation packages.
Having said that, there are a couple of companies that specialise in this type of let, detailed at the end of this article.
More commonly those who rent tend to sign six or 12-month contracts. They are expats, people in Egypt to work or do business, people waiting for their own property to complete and - interestingly - around a third of the market is made up of middle-aged European women with Egyptian partners.
Lettings mostly come through the agents, who will tend to take on and promote the properties they've been involved in selling. A good location and facilities such as access to a pool will make a property more lettable.
The best way to check out what's really happening with the Egyptian property market is to visit and see what's being built. I spent some time with Barry Aldridge from Pioneer Property in Sharm and he took me on a tour of some of its developments, such as the completed Delta Sharm and the mostly completed Roman Theatre, pointing out the differences in the quality of workmanship and finishing apparent in some of the neighbouring developments.
Pioneer is an established operation offering a wraparound service that includes legal services, lettings on behalf of owners and referrals to a mortgage company that specialises in helping British home-owners raise the capital to purchase their Egyptian holiday homes. 'We like to make life as easy as possible for our clients,' Barry told me.
A British couple who had recently bought a property here were basking by the pool, and cheerfully confirmed this.
In search of information provided by neither a brochure or salesman, I spoke to Sharm-based businessman and friend of Red Sea Diving College Tamer Elana. Tamer isn't a property-developer but has watched the market develop and is happy to advise potential buyers, after seeing the mistakes commonly made.
'You cannot simply rock up in Sharm and buy a house on the beach for ?30K from somebody you met in a shop selling souvenirs,' he tells me straight off. 'Or if you do, you're an idiot.'
Over the course of our conversation, Tamer provided most of the facts for the Top Tips sections, along with a useful checklist to guard against rip-offs.
He believes that many agents offering off-plan deals for big developers are too expensive. 'You can generally get a better deal direct from the developers. For example, the people who own the Laguna Vista and Oriental Resort hotels are also developing properties and offer good value - though I appreciate that I have the benefit of local knowledge and contacts,' he added.
His view of the property market, especially in Sharm, was overwhelmingly positive. 'It's a great place, offering a fantastic lifestyle - year-round diving and sunshine, exciting business opportunities. Who wouldn't want a piece of that?' |
- Egypt is regarded as a politically stable country.
- There is a functioning legal system, and the government has passed 'investor-friendly' laws to enable non-Egyptians to buy and sell properties easily.
- Taxation on buying, selling and renting property is minimal to non-existent; there is no capital gains or inheritance tax.
- Economically, Egypt is self-sufficient in oil, has income from the Suez Canal, cotton exports and tourism; as Third World countries go, it has a steady economy and is doing pretty well.
- The cost of living is a fraction of that in the UK - your money literally goes 10 times further.
- There is a thriving expat population and a friendly relationship between wealthy Egyptians and Europeans.
- Billions of pounds in investment is being made building luxury developments here; so the people with money view Egypt as a good investment. All the major hotel chains - the Hiltons, Radissons, Novotels - have invested in buying land and building in Red Sea Riviera resorts.
- Where else would you get 365 days per year of world-class diving, and a great all-year-round climate, just a five-hour flight away?
- Egypt is still a country of vast inequalities. The majority of Egyptians live on barely ?1 or 10 Egyptian pounds a day.
- Culturally Egypt is a Muslim country so, together with the point above, it would be unreasonable to expect European attitudes or standards.
- The race to develop new areas and increase flights is being pursued with little regard for impact on the environment. What would be the point of buying a Red Sea diving pad if the pristine conditions you came to visit have been destroyed?
- Egypt is a Middle-Eastern country, situated in a highly unstable area with numerous unresolved conflicts. Buying a property here could never be regarded as a risk-free investment.
- If there's an economic downturn in the UK/Europe you might find it hard to afford, sell or let your Egyptian property.
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Pioneer Property: A British company based in Sharm and probably the biggest agent for the area, it handles developments including Delta Sharm, Na'ama Heights, Montazah and Nabq Hill. It also offers lettings and legal services. Head office is in Hadaba, Sharm, with a shop front in Na'ama Bay. www.pioneer-property.co.uk, 0020 693 6 0625.
Worldwide Destinations/DPC International: British-based company with mostly Hurghada-based developments, including the prestigious Sahl Hasheesh and Serrenia. You can download pdfs of its brochures, including architects' drawings of the properties on offer, www.worldwidedestinations.com . 01480 471023.
Fairfax Investments: UK-based company that handles the Zafarana Resort and offers a service including all facets or overseas property investment, www.fairfaxinvest.com, 020 7870 7909.
Red Sea Rentals: This company offers rentals in the Hurghada area (www.redsea-rentals. com, 0020 123 714861), and properties for sale at its sister website, www.redsea-living. com
El Gouna Apartments: British-owned lettings agent for apartments and villas, www.elgounaapartments.com, 01538 308 626
British Embassy, Cairo: Useful info on Egypt, including advice on obtaining residents' visas and referrals to the appropriate British Consulate, www.britishembassy.gov.uk/egypt, 0020 279 40852
For general advice on buying abroad, visit www.channel4.com/4homes/buyingabroad/index.html
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| Delta Sharm is proving popular with buyers. Properties in Sharm el Sheikh start at about £20,000. |
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| If this is the sort of view you want outside your front door, talk to the Red Sea property agents. |
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| Access to a pool will make your property easier to let when you?re not using it. |
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| Be sure to check out the property in person before you buy - you don't want any nasty surprises! |
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| The Roman Theatre development in Sharm el Sheikh. |
- You must employ a lawyer. All legal documents should be presented in both Arabic and English
- Egyptian lawyers must hold a licence to practise from the state. Check that your lawyer has one.
- Check what licence the owner of the land has before making any purchase.
- Talk to other people who have purchased in the same or nearby developments.
- You can contact the local British Consulate to check the legitimacy of any developer or seller. Only a small number of people are involved in the property business and any problems are likely to end up with the consulate, so it should be aware of any issues.
- Be sure that you can meet the payments on your property before signing a contract. This will involve paying large lump sums over a relatively short timescale.
- If possible, visit the site and have a look at the standard of the work and the quality of the finishing - Egyptian builders have a reputation for using cheap materials if unchecked. You need to ensure that European standards will be guaranteed.
- As ever, if you're offered a deal that looks too good to be true - it probably is.
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WHO OWNS THE LAND?
Has it actually been paid for, or is the person taking money upfront in an attempt to finance properties yet to be built? If so, what guarantee do you have that he will be able to meet the financial obligations and complete the properties?
ARE YOU BUYING A PROPERTY OR A DEBT?
Your lawyer needs to check, and get signed assurances, that the property is being sold with no outstanding liability. You don't want to move in and find the bank demanding that you settle an outstanding loan taken out to buy the land.
WHAT DOES THE DEVELOPER HAVE A LICENCE TO BUILD?
If a licence has been granted to build a hotel, the person may be building 'chalets' as part of a hotel development and passing them off as villas. You won't end up with a freehold but as a 'shareholder' or partner in a hotel venture - with a corresponding share of liability for the business.
WHAT'S IN THE CONTRACT?
The contract is key. Get a lawyer to ensure that every detail is checked out and that your own terms and conditions are inserted and can be enforced. In Dahab, for example, where Bedouins own much of the land, there are few written records. So there is much scope for misunderstandings about who owns (and can sell) the land. Determining the exact size, shape and location of the plot can be a challenge.
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