Ayman Ismail, CEO of DMG Mountain View, on how aggressively growing the real estate industry can make a positive social impact on our quality of living.
By Omneya Makhlouf and Noha Mohammed
Would you say moving to the suburbs has changed our lifestyle habits — as in a need for more space, the great outdoors, fresh air and less congestion and so on? Would you say that this has actually affected domestic tourist destinations like Sahel and the Red Sea because people no longer feel a need for weekend getaways what with their landscaped gardens, communal pools, clubhouses and food venues?
I think the more people started to get used to living in villas and away from the city center, and so on, the more they were encouraged to buy in other places as well. I think the only thing is that there’s a slowdown of movement from Mohandiseen, Heliopolis, and so on to 6th of October City and New Cairo in the last couple of years because of the security. There’s less freedom of movement. The other thing that is happening right now is that most people who moved to new villas in compounds with gardens and pools are finding life different because they’re not used to many of the expenses that they now have to carry. They’re discovering that all the landscaping cost is something that they have to share as opposed to the government paying it when they lived in apartments, like the garden in front of the building, or the lights on the streets. Maintenance of a pool and a garden is not a small task, so actually people are discovering that while this life is full of joy and has a tremendous quality improvement versus being stuck in the very crowded areas, it still has its own cost that people may not have calculated.
Can you tell us a bit more about domestic venue destinations? When do you think the market will reach saturation?
Eventually, yes, the market will reach saturation. But if we want to reach this equilibrium, something major has to happen. Let’s take the high-end market, which has a shortage in supply. How did it come close to reaching saturation? We had big companies like Emaar, Sodic, Mountain View, Talaat Mostafa and so on who all have reached a great segment with great profitability and they all went into offering products in that segment. As you go down the social pyramid, the interest of the private sector to play a role goes down, because the price versus the cost is less attractive for the developers. So, the more you make the market interesting for the private sector, the more you will accelerate the ability to manage the supply and demand shortage. So that actually requires the government to start to think differently.
Also, the other factor involved is creating a law that can be reinforced on rental. So many people own apartments or villas that they are currently not utilizing at all because they’re worried about renting them to someone else with the possibility of them not wanting to leave it. Therefore, this is an unutilized asset. This is why I was always supportive of the government push to implement property taxation. Currently, if you own something it costs you nothing. If you have property taxation then you will actually be paying money every year and that would make you feel like, ‘okay now I have to generate some revenue to be able to pay,’ and I think that will be good for the country, even if it requires people to move a little bit out of their comfort zones. Currently, we have a lot of assets that are not taxed or utilized. It’s kind of a win-win: the country would win because it would collect more taxes, the people struggling to buy an apartment or a villa to get married will find more reasonable prices for rent, and the owner will start to make money.
Would you say people are pulling money out of banks and putting it into real estate, what with the current political upheaval, or is the market collapsing?
No, the market is not collapsing. Real estate will continue to be a safe haven for investment. If we go back and analyze the market in the early 1960s, we will find that the prices have increased on a quarterly basis. When things are bad, the prices would be stable and the maximum would be for one year, then it comes back. So for most people, they always see real estate as a great investment.
With so many developments in New Cairo, and land quickly running out, what would you peg as the next ‘big’ destination?
The land in New Cairo is not running out. There’s a lot of land. The key thing is that these lands are not being efficiently utilized. Some people own the land and they’re not developing it. Before the Revolution, land that was not utilized was confiscated. Back then a lot of people [put their land up for sale] or were willing to partner with developers to help them [build up] the land. That was good for the country. It is actually bad for the government to see that the amount of infrastructure that was put in New Cairo and 6th of October City is not being utilized. I think there should be a very strong push from the government to [obligate] people to develop the land.
Where will MountainView’s next development be?
We have diversity in our portfolio with projects in New Cairo, 6th of October, the North Coast, Ain El Sokhna/Red Sea, and Ras Sidr. But what we’re focusing on right now, because of the dynamic of the market, is 6th of October and New Cairo.
CityScape is set to take place this month. Are you planning any joint ventures?
Currently we are in discussion with the CityScape team on what type of participation we will be involved in. And what we have confirmed right now is basically three out of the portfolio of companies that P&G has a majority shareholding in, which are Edrak, which is a fine-finishing company, DME, which is the design company, and Curve, which is the landscaping company. The three have already made a decision to work with us and they’re currently finalizing the contract with CityScape.
With unemployment on the rise and a pressing need for building materials, landscape design as well as home furnishings, would you say that the real estate boom has opened up niche markets for certain industries? And would you agree that with ‘ethnic’ and ‘local’ becoming trendy, the boom has actually revived dying local trades?
Real estate is a very good sector to focus on if you want to drive employment because actually it impacts a lot of industries in many ways. Once you get that ball rolling then construction will get going, infrastructure will start, and so will landscaping, fine-finishing and so on. And all of those are labor-intensive. So in an economy like ours right now where we actually suffer in a big way from high unemployment, and all the social issues that come with that, that would be one of the key areas to focus on and really try to drive. If you look at what PM Ibrahim Mehleb was trying to do when he was the Minister of Housing and Development, he was actually trying to transform Egypt into a big construction site. [That was very astute of him, to recognize] the situation that we’re in where you cannot easily expect tourists to come and need to focus on the industry that has a labor-intensive character and doesn’t have a lot of interactions with the external world in the short term. In the long term [the real estate sector] is a key driver for absorbing the workforce.
How would you describe the holiday home market and property development in Egypt in the past six months?
If you look at the real estate market in general, then we’re talking about different segments of the market. So, we’re talking about the first-home residential market, the second-home residential market, which is like the North Coast or Red Sea homes. Then you have the retail markets and the commercial markets, which are basically the office spaces. Each one of those markets has a different dynamic.
Before the 25th of January Revolution, things were going very well, the market was expanding very fast, a lot of people were investing in real estate. After the 25th of January some investors shied away from investing in real estate, but only a small proportion. And also, we had late sales. Some people would buy next month rather than this month. But in absolute, the fundamentals of the market remained very robust. So if you look at the last six months, I would say it’s a rollercoaster. Sometimes you have people feeling confident and comfortable about the country, and they come and buy, and sometimes because of the political situation or security issues, they shy away. It’s not that they decided not to buy; it’s kind of a delay. So they will come back again.[When it comes to holiday homes], the market in areas like the North Coast or the Red Sea is probably slowing down and prices have been stabilizing over the last few years. But again, if you look at the price per meter in either area, we probably have the lowest prices in the world’s beaches. Why is that market slowing down? This is because right now a lot of people are considering buying homes outside of Egypt for security reasons. They’re saying ‘okay, now is not the time to travel to Alexandria or to the Red Sea,’ and some of them decided to go and purchase outside of the country. So a bit of the local market went abroad. Also, some of these local markets were attracting foreigners. Gouna is a clear example of where a lot of British people were buying houses. Most of these people are not coming anymore, so the demand on that market slowed down significantly over the last few years. It is expected to be like that for the next few years until we transition into a more stable economy and a more secure state. Once those things [are in place], then we expect the market to bounce back. And again, the availability of land in those areas is not that much, so we expect that when the market comes back, prices will start to rise. et