What is good for real estate investment in Egypt—residential or commercial?

The Egyptian real estate market is now in prosperous status! As the nationwide real estate price index soared by 28.4% in February 2023 from a year earlier while the real estate market in Egypt during the first quarter of 2024 had around 600 active projects with a value of $309,629 million in the residential and mixed-use sectors according to market watch and the number of newly launched projects in Egypt increased by 50% compared to Q1 2023 . So if you are contemplating real estate investment, It is the perfect time now.

But how do you find the best real estate investment opportunities in Egypt? And when it comes to choosing between commercial and residential properties, which is the better investment? In this blog, we’ll highlight key strategies for identifying prime real estate investment opportunities, and weigh the pros and cons of real estate investment in commercial versus residential properties. Whether you’re a seasoned investor or just starting your real estate journey, this guide will help you navigate the dynamic Egyptian market and make informed decisions.

First of all, to start investing successfully, you need first to identify your goals and the reasons why you are investing. So you need to ask yourself these questions:

• Are you looking for a property to live in in the future?
• Are you looking for an extra source of income?
• Are you looking to purchase a property and resell it again in the future?

Some people invest in residential properties to rent them out, which gives them a steady monthly income. They can also sell the property later and make a profit if property prices have increased. Buying residential properties can also protect against the effects of economic crises or wars, which can reduce the purchasing power of money, a situation known as inflation. On the other hand, commercial properties attract investors and business people. Often, renting commercial properties is a long-term investment that pays off after five years or more. For example, shops, restaurants, and event halls are not expected to make big profits at the beginning but do so after some time.

That is why it is very crucial to identify your needs or goals so that you can know what will work best for you, residential or commercial investments.

Now that you know how to identify your goals, let’s know more about the difference between the residential and commercial real estate investments with their pros and cons, so that you can make a more informed decision and answer the following question:

Is it better to invest in residential or commercial properties in Egypt?

Let’s agree that both have benefits, however, each of them has its own advantages and drawbacks that we will tackle in this section.

Residential investments

Advantages:

• Residential properties offer stable rental returns.
• There is a constant demand for residential properties, especially in areas with good amenities.
• Managing residential properties is easier than managing commercial properties.
• Residential Properties: Offer annual returns ranging from 5% to 10%, influenced by factors such as location, quality, and demand.
• It is very easy to sell such properties as the demand is always high

Drawbacks:

• Residential properties typically yield lower returns compared to commercial properties.
• There is high competition in the residential real estate market.
• As an owner, it might be a hassle handling the tenants problems and complaints.

Commercial Investments:

Advantages:

• There is high demand for commercial properties, especially in densely populated areas.
• There are various types of commercial properties to choose from, such as office spaces, retail shops, warehouses, and hotels.
• Commercial Properties: Including retail spaces and offices, present higher returns of 8% to 12%, attributed to elevated rental rates and longer lease terms.
• The owner is not responsible for maintenance and repair expenses; the tenant handles all of this in a way that suits their business. 
• Cash flow is good for a long time since the lease extends longer than residential properties, often up to five years or more, with the chance of renewal. 
• The property owner doesn’t have to deal with tenants, their problems, or collecting rent, as large investments like commercial properties are managed by property management companies that take care of all these matters without bothering the owner.

Drawbacks:

• Commercial properties are more susceptible to risks than residential properties, especially in case of economic downturns.
• Typically, the cost of purchasing and developing commercial properties is higher than that of residential properties.
• Commercial properties require more complex management compared to residential properties.
• Requires heavy capital and expertise.
• It;s hard to sell such properties as the demand is low, however the reting demand is higher.

Now that you know the difference between commercial and residential real estate investment along with their pros and cons. It is about time to know some factors that you need to take into consideration while investing in any property whether it is residential or commercial.

 Factors that increase the expected investment profits:

• The area where the property is located – is it an attractive investment area or not?  
• The available services, such as finishing services and the level of luxury.  
• The timing of the investment.
• Always evaluate your options and strategies based on your situation and long-term goals.
• Compare between different projects and find the one that is suitable for you in terms of :

1. High demand.
2. Prices and payment plans.

•  It is recommended to invest in new cities/projects that are still under construction as unit prices are lower than when the project is complete and demand starts to increase which will lead to an automatic rise in the prices of units. By investing in a unit off-plan you will be able to sell it later at a higher price

Want to know the ideal projects for real estate investment? Read the following articles:

Top 4 places for real estate investment in Egypt

Top Investment Projects in the North Coast for 2024, Part 1

Top Investment Projects in the North Coast for 2024, Part 2

The best business and investment opportunities in New Cairo, 2024 launch-Part 1

The best business and investment opportunities in New Cairo, 2024 launch Part 2

BottomLine

Real estate investment in Egypt is a great opportunity that you don’t want to miss. As it is considered the safest and most profitable investment in Egypt right now. So if you want to invest your money in properties wisely, let us help you find the ideal opportunity that suits your budget and needs.