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Red Sea Resort
 If you like a little risk, now’s the time to invest in the Sinai Peninsula, reports Jane Drew. Politically speaking the waters are calm and the Egyptian government is there to help
Published in Square Foot Magazine on March 1 2007
Believe it or not there’s a building boom on the Red Sea resort of Sharm el Sheikh at the tip of the Sinai Peninsula, with foreign investors eager to buy.
Low off-plan prices (from $460,000 for a beachside apartment), guaranteed rental yields, holiday homes in the sun and high returns on investment (up to 25 percent per annum in some locations) are all reasons for the current success of Egypt as a holiday and property location. An increasing number of visitors are buying into luxury apartment complexes in the major holiday hotspots, trusting in the current Egyptian government’s commitment to further economic growth and stability. Importantly too Egypt is now well known as a number one, medium-haul top-end destination for European travellers.
Resort living
Sharm el Sheikh began interesting developers in the 1980s when the focus was on Naama Bay and what is now called the old town. The cluster of pearl-white, three-storey complexes is now spreading north along the Gulf of Aqaba to where Nabq Bay hits the Sinai dunes. Resorts are typically marketed as “villages”, with every amenity on tap.
What Sharm is presenting is a winning formula of sun, sea, sand and security. Take a typical mid-range resort, Delta Sharm, due for completion this year. The complex boasts its own health club, restaurants and shops. Beautifully manicured gardens are punctuated by a total of I0 swimming pools around which the 1,500 self-sufficient flats are grouped. Big name resort-hotels are also well established in the area including the Ritz Carlton, Iberotel, Sheraton and Four Seasons, each occupying its own pristine stretch of beach.
If you want a sight to rival the pyramids, cross the Red Sea to Sahl Hasheesh Bay, just south of the resort of Hurghada, where Norman Foster is building his first luxury resort, the Serrenia. Spread over 500 acres, with about half a mile of beachfront, the 1,216 properties are inspired by the desert’s undulating sand dunes, and range from 1,500 sq-ft apartments to stand-alone mansions. Foster is also providing berths for super-yachts, pads for private jets and helicopters, and legions of concierges, chefs and domestic help. Due for completion in 2010, Serrenia will have not just a hotel “in excess of five stars”, but its own submarine.
The buying is easy
Since the 2005 suicide attack on Sharm’s Ghazala Gardens Hotel, all developments have security barriers and guards, and roads bristle with police checkpoints. And this, it seems, is making foreign investors feel secure – as is the attitude of the Egyptian government. Foreign investors are recognised as a big investment opportunity and laws passed in 2005 have streamlined procedures, making purchasing property both easy and attractive. Restrictions for the Sinai, Red Sea and Mediterranean coasts, that limited ownership to two properties and banned resale within five years of buying, have been rescinded. And all properties in Sharm sold to non-nationals are on 99-year leases — renewable on resale. In Hurghada, just across the straits, freehold purchase is permitted.
 There is no Egyptian capital gains tax. However, some developers include the provision to pay them a percentage of the original purchase price on resale. And if you sell through them, they are entitled to charge 5 percent of the sale price in commission.
Importantly buying costs are low: an Egyptian lawyer’s fees will be about $3,000, a registration fee about $6,000; community and maintenance charges are also modest, from about $4,500 a year, which includes 24-hour security. Annual building taxes range from about $700 a year for a one-bed flat to $1,500 for a three-bedder.
When finalising a deal it’s wise to insist on a contract in Arabic and English, with the translations side by side on the same page, and have them checked. In the event of a dispute, Egyptian courts will only recognise the Arabic contract, so you and your lawyer need to know exactly what it says.
Relaxing returns
Strong economic growth and increased investment in infrastructure are boosting the property investment market as a whole and prices are rising rapidly. Investors are looking at a steady year-on-year capital appreciation of between 20 percent and 30 percent and increased inward investment is creating a rich investment climate.
At Delta Sharm, a one-bed flat bought in 2002 for $383,000 recently sold for $766,000. Villa prices are higher at the Iberotel, where a unit bought three years ago for $6.60 million could go for as much as $8.37 million. At the Sheraton, villas on the market for $5.47 million four years ago, now sell for as much as $23.02 million.
Riding on the back of a year-round tourist season, rental is of course a real option, and again the idea is to make the process as easy as possible for overseas investors. Most developments, especially those in hotel complexes, offer rental management services, either for a period of guaranteed leaseback or for a share of the rental income. Delta Sharm, for instance, offers buyers the option of turning their purchase over to the management company to let for a guaranteed 6 percent yield on the purchase price, or it will take 15 percent gross on any rental income, though with no guarantees on how much this will be.
Investment potential is certainly there, but with the building frenzy releasing more and more “investment units”, the area’s political volatility and the fact that there is no guarantee how long flights delivering holidaymakers’ rental yields will remain cheap, you might be best consulting an ancient Egyptian oracle before buying into this particular dream.
ON THE MARKET
At Delta Sharm, a four-year-old studio with basic kitchen and shower is on the market for $842,858. A fashionably furnished one-bed costs $1.53 million, and new three-bed apartments with terraces are priced at $2.46 million. www.deltasharm.com A 9,000 sq-ft bungalow, with European fittings, 50 yards from the beach at the Sheraton is going for $23.02 million. A three-bedroom villa with three bathrooms, two reception rooms and a swimming pool is on the market for 916000 $14.06 million. Uncover Egypt, www.uncoveregypt.com
At the Four Seasons, prices for a 3,300 sq-ft, three-bed villa start at $7.02 million. Egyptian Experience, www.redseadevelopments.co.uk
At Serrenia, the smallest flats start at $3.07 million, detached villas at $11.51 million. A three-bedroom, three-bathroom, waterfront maisonette, with a private terrace and use of a shared pool and tennis court, is selling for $17.64 million with Savills, www.serrenia.com |
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