Egypt's real estate market that stalled in H109 amid the global financial crisis, and is still lacklustre, although there are some tentative signs that demand may be returning in the luxury market. That subsector, nevertheless, remains subject to considerable oversupply. During the country's booming three years prior to the crash, gated compounds in the eastern and western suburbs of Cairo attracted wealthy homebuyers, but sentiment is becoming cautious and funding remains difficult to find, putting an additional brake on any recovery. Developers' results continue to be poor, with many reporting losses as they fail to book sales, although those losses appear to be narrowing. Many continue to pin their hopes on growing demand for low and middle-income property. Analysts have put demand in this sector in Egypt at 275,000 to 350,000 units a year. While the commercial sector was depressed in H109, a shortage of quality office space suggests that longer-term prospects are still sound. There has been little reliable data from Q309, but most analysts see a decline in speculative buying, particularly as demand wanes among Egyptians working the Gulf States. The Egyptian central bank held its benchmark interest rates at a three-year low in November after six consecutive cuts. The Monetary Policy Committee left the overnight deposit rate at 8.25% and the overnight lending rate at 9.75%. However, the inflation rate has been edging up for the first time this year, rising to 10.8% in September from 9% in August and economic growth accelerated to 4.9% in Q309. We have once again revised down our growth forecasts for Egypt for 2010, although we are leaving our 2009 projection unchanged at 3.7%. Crucially, we still see real GDP expanding positively in both years, which is more than can be said for a lot of countries. The business environment will remain broadly pro-investment. There is a risk of more populist policies, and we have seen this coming to the fore over 2008 but, at the same time, the government is trying to stimulate investment and growth and has taken positive measures to cut customs duties and support industry. Egypt has not escaped the effects of the credit crunch. Borrowing costs are higher, and there is little appetite for perceived risky investments.
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