Resale Or Prime:Which investment is best suited for you?
In the world of real estate, investors always face many confusing choices about the property’s location, type, price, and what determines the quality of real estate investment.
However, there’s another important factor to consider before buying or investing, and that’s choosing between resale or primary properties.
This decision can significantly impact many other key factors because each option has its own advantages, risks, and different investment returns.
So, before making any investment decision, here’s a comparison between investing in resale and primary properties.
Table of Contents
Resale Properties
Real estate investment in the “resale” market refers to the process of reselling properties that were previously purchased, aiming to make a profit from the price difference between buying and selling This market has seen significant growth, especially in new areas like the New Administrative Capital in Egypt. However, before diving into the advantages of resale properties and the risks involved, it’s important to note that there are two types of property resales:
1. The first type: Full ownership
In this type, the property is purchased from an owner who fully owns it without any financial obligations such as installments or Late payments. When you choose to buy the property this way, the deal is clear and quick. You are required to pay the agreed total amount to immediately receive the final contract that proves your full ownership.
– But it is important to monitor prices periodically, as property prices here depend on the market price and the value per square meter in the area where the property is located. These prices are constantly changing, so it is advisable to keep an eye on these Changes regularly.
2- Purchasing from the developer to resale it
– The second type is when you decide to purchase a property from the developer to resale it after paying several installments and a down payment In this case, the sale takes place at the developer’s office, where administrative and transfer fees, typically ranging from 5% to 10% of the property value, must be paid. However, if the transfer is to first-degree relatives like siblings or children, it is often done free of charge without additional fees.
– After the transfer is completed, the developer prepares a new sales contract between the new buyer and the company. The buyer is then provided with all the necessary documents to register the property in their name and to facilitate contracts with utility companies like electricity, water, and gas.
Whether it’s the first or second type, investing in resale properties offers many advantages, making it a preferred investment for many investors.
Benefits of Investing in Resale Properties:
Investing in resale properties is considered an attractive option for investors, as it provides opportunities to build passive income from rents and continuous financial returns. It also allows investors to benefit from high market demand and achieve profits from reselling units. What enhances the chances of success in this sector are its various features, such as:
1. Handover Time:
One of the key advantages of investing in resale properties is the immediate handover. In many cases, investors can take possession of the unit right after the deal is completed, allowing them to move in or start renting the property without delay. This quick handover makes it the primary attraction in the resale property investment market.
2- Investment Returns:
Another advantage of investing in resale properties is the various opportunities to achieve substantial investment returns, especially when choosing the right units in desirable locations, such as new cities or attractive areas. In these properties, the return on investment can reach between 8% and 12% annually.
3- Rental returns:
Rental returns for resale properties range between 7% and 10% annually, especially in areas with high demand, such as East Cairo. These returns reflect a significant increase in rental prices.
According to the Egyptian Real Estate Platform, rental prices have risen by 122% between the second quarter of 2023 and the second quarter of 2024, indicating the attractiveness of the real estate market for investors despite economic challenges.
4- Average Prices:
Resale properties in Egypt have recently experienced a medium price increase of 5% to 8%, especially in new cities like the New Administrative Capital, 6th of October City, and El Shorouk City. This increase in prices makes investing in these properties more appealing.
Even with all these attractive advantages of investing in resale properties, investors in this market may face several risks.
Risks of investing in resale properties
1. Pricing Risks:
The pricing of resale properties depends on the property’s value and the price per square meter in the area where you are buying, as well as the timing of the purchase This can present many confusing options for similar units.
Therefore, you should review the prices well in the area where you intend to buy.
2- Cash Payment Requirements:
Investing in the resale property market typically requires having the full amount or a large portion of the property’s price in cash. This can be a significant barrier for many small investors who may need flexible payment plans and installment options.
3- Competition from New Developments:
The emergence of new projects and real estate developments can also impact the value of resale properties, especially if these new projects offer better features or competitive prices; buyers may prefer these options, leading to a decline in the value of resale properties.
4- Market Trends:
Changes in market trends, such as a preference for living in new cities or gated communities, can also affect the value of resale properties. If investors begin to favor properties in specific locations, this may lead to a decline in property values in other areas.
5- Duration Required for Renting:
For resale properties in Egypt, reports indicate that these properties may take longer to rent, usually ranging from 60 to 90 days. This delay is often due to factors such as the need for repairs or promotional issues.
To confirm this point, the data showed that the rental market is experiencing a difference between new and used properties, as new properties are rented out faster due to high demand and general market conditions.
In general, resale investment remains a popular choice for many investors looking to achieve quick returns However, they must consider the costs and factors related to the real estate market and have a strong understanding of its dynamics.
This brings us to the second option, investing in new properties (Prime), which is an attractive choice for investors seeking long-term returns Still, this option also comes with its advantages and risks Here’s what you need to know before investing in Prime real estate.
Prime Properties
Investing in Prime properties comes with several qualities that make it a secure option; their prime locations and modern designs ensure that their value remains stable over time, offering long-term growth opportunities and consistent investment returns, and this is for the following reasons:
1. Payment Methods:
One of the key features of new properties (Prime) is the flexible payment plans and long installment systems, starting with a down payment ranging from 5% to 10%, with the option to pay in installments over 7 to 10 years Additionally, new properties are in excellent condition, so there’s no need to worry about repairs or renovations, Furthermore, investors have a wide range of options when purchasing a new property from the developer, allowing them to choose the design and finishes that suit their needs.
2- Investment Returns:
– Investing in new real estate in Egypt, especially in top spots is a great way to make solid returns, The Egyptian Real Estate Market Investment Guide for 2024 shows that both local and international investors are interested in this market, This is thanks to a growing population, a good location, ongoing infrastructure upgrades, and the expected investment returns in the Egyptian real estate market to be between 10% and 15%.
– The Egyptian real estate market is expected to grow at a rate of 7.23% each year from 2024 to 2029. According to Statista, this growth will increase the market size to 2.07 trillion US dollars by 2029.
3- Rental returns:
In 2024, reports expect rental yields for investment in new properties in Egypt to range between 7% and 9%, with the possibility of some commercial projects achieving yields of 10% or more. These yields are influenced by multiple factors, including location and the developer’s reputation.
For example, data from the Global Property Guide website indicates that the total rental yield in downtown Cairo is approximately 6.34%, while it reaches 6.58% in areas outside the center.
4- Average prices:
According to recent reports, new property prices have seen a significant increase, rising by 10% to 15% in many major cities over the past three years, these trends are expected to continue into 2024 due to the impact of inflation and increased demand for properties.
For example, reports from the Egypt Real Estate Platform indicated that property prices have significantly increased over the past year, with price hikes reaching 175% to 180% during the period from the second quarter of 2023 to the second quarter of 2024.
5- The required rental period:
In the Egyptian market, new prime properties are rented out faster compared to older properties, with reports indicating that the rental period usually ranges between 30 to 60 days. This reflects the increasing order for new properties, which is attributed to technological improvements and investors’ inclination towards acquiring properties with lower maintenance and modern features.
According to the Mordor Intelligence report, the real estate market in Egypt is noticing strong dynamics, with an increase in residential and mixed-use projects, which is speeding up rental processes and driving up prices.
While direct investment in prime properties offers various advantages, such as stable investment returns and high rental yields, several risks need to be carefully considered.
Risks of investing in prime Properties
The risks of investing directly in new (prime) real estate are an essential part of the decision-making process, as they include market fluctuations, price changes, and legal issues. Therefore, it is necessary for the investor to be fully aware of them to achieve a successful investment. Below we review the most prominent of these risks:
1- Delay in project delivery:
Investors may face delays in property deliveries by developers, affecting rental or personal use plans. Such delays could lead to potential loss of returns during the waiting period.
2- Infrastructure Issues:
Many new projects may still be in developmental stages, meaning that infrastructure such as roads, schools, and healthcare services may not be available or could be delayed, this can affect the property’s value and its investment potential.
3- Changes in Demand:
The preferences and needs of buyers and tenants may change over time, which can impact demand for new properties, If many residential units are built in a specific area, it could lead to an oversupply compared to demand, putting pressure on prices.
4- Financial Risks:
Some real estate projects rely on loans or external financing, which can expose investors to risks related to debt repayment, any changes in interest rates or loan terms can significantly impact profitability.
It’s clear that both options, new and resale properties, have their pros and cons; statistics show that new properties tend to offer lower returns in the short term but come with lower maintenance costs, while resale properties provide an opportunity for higher returns, although with potentially higher maintenance expenses.
Therefore, the best choice between resale and new (Prime) properties depends on your investment goals, local market analysis, and budget before making any decision. The good news is that you don’t have to navigate this confusing journey alone; AFFSQUARE provides you with all the local market analyses and future trends you need to determine which investment option is the best for you in terms of investment returns and expected profits.
To know more about real estate investment :
What is good for real estate investment in Egypt—residential or commercial?
3 Key Factors for Ideal Real Estate Investment
