Does the Red Sea represent a pharaoh bargain for buyers?

Britons hunting for holiday homes in Egypt have been stung in the past by unscrupulous developers. The aim is to think big, says Julian Knight

(Press Picture)

Egypt is a country of extreme contrasts.

You have the timeless quality of the Sphinx and the Pyramids and the manic hustle and bustle of Cairo, Africa's biggest city. You have the sweltering heat of the Sinai desert and the cooler climbs of the east Egyptian mountains. But for most British property buyers, Egypt means one thing – the Red Sea. Massive developments in the Sharm el-Sheikh region, the Red Sea's premier resort, have propelled Egypt into the first division of overseas property buying destinations. It may not have the cachet of the Caribbean, the glamour of the French Riviera or the accessibility of Spain or Portugal, but there are reasons why Egypt appeals.

"Destinations like Sharm el-Sheikh, only five or so hours away from Britain, are more and more popular not just with the UK market but with Italian, French, Scandinavian, Russian and Ukrainian tourists with its year-round sunshine," said Loxley McKenzie, the managing director of Egyptian specialist estate agency Colordarcy.com. "Demand for rental accommodation is high throughout the year, as opposed to only four to six months in other destinations like Turkey and continental Europe."

However, you have to choose your location wisely. Take, for example, the cautionary tale of Hurghada, once a tiny fishing village by the Red Sea before the airlines and then the developers arrived. "Almost overnight, Hurghada became a property development hot spot. Firms moved in from Europe and started marketing the place, persuading the Egyptians that they would bring new wealth to the region," said Neil Hollingsworth, a senior manager at Egypt and Turkey property specialist Rivermead Global Property (Rivermeadglobalproperty.co.uk).

"However, some of these master developers simply took the buyers' cash and then didn't pay the Egyptian firms which had built the properties. Understandably, the Egyptians wanted their money so seized the properties, meaning the buyers had paid their money but couldn't move in. It was a complete mess."

Mr Hollingsworth estimates that some 80 per cent of sales in the area were affected and has spent the past three years trying to sort out this "complete mess" left by the long-gone master developers negotiating with local builders to get buyers their homes. But con men simply running off with buyers' deposits isn't the only pitfall with Egyptian property.

"A not uncommon problem buyers have is seeing a picture of the plan of a property at what seems like an incredibly cheap price, only to discover once it is built that the reality bears no resemblance to the original plans," said Mr Hollingsworth. To safeguard themselves further, Mr Hollingsworth urges buyers to use an independent solicitor who lives away from the area where the property is located to ensure no conflict of interest.

This problem can be sidestepped by buying second hand. Another alternative is to go with one of Egypt's massive development firms such as Orascom, which is behind the El Gouna development (www.elgouna.com), a short drive from Hurghada between the east Egyptian mountains and the Red Sea. El Gouna is a mature development with a marina, championship golf course and another under way. It is also huge – regularly catering for 22,000 visitors a week in high season – with masses of shops, bars and restaurants. The resort itself has a real community feel, with an estimated 12,000 permanent residents living in apartments and villas near the beaches and man-made lagoons that are dotted around El Gouna.

New development is under way at El Gouna based around the marina, golf course and in a variety of different styles from modernist to North African. Apartments start at $173,040 and luxury villas top out at $2.6m. There are 10 apartments available right on the marina at $643,000 for three beds or from $500,000 for two beds. Resale units are also available from $100,000 for a studio in other locations in the resort.

One of the main advantages of El Gouna is that the entire development is owned by Orascom, one of Egypt's biggest companies. "El Gouna is expensive compared with some other locations, but you've got to remember that you are buying into a luxurious development and real security. It is best to go big rather than small when it comes to Egypt," Mr Hollingsworth said.

Along similar lines, Rivermead is currently recommending that its clients look at the massive new Sahl Hasheesh development. With five golf courses planned and a marina, Sahl Hasheesh will be the biggest resort community on the Red Sea and prices are lower. "It's quite substantially less expensive than El Gouna and that indicates that it could be a good return for buyers, long term," said Mr Hollingsworth.

But for many Britons, Egypt means the Red Sea resort of Sharm El Sheikh. "There are two main areas appealing to British buyers," said Mr McKenzie of Colordarcy.com. "Naama Bay, which is south of the airport, is the better known and vibrant area of Sharm, with many bars, restaurants and nightclubs. Nabq is the up-and-coming area of Sharm. Situated north of the airport, it offers a more spacious, well laid out, family-friendly environment with superb sandy beaches like Zouara beach. Property prices are also more affordable."

Colordarcy.com estimates the price of a beachfront two-bed apartment in Sharks Bay at £165,000, but only five minutes further from the beach, there are three bedroom villas with private swimming pool available for £150,000. A one-bed apartment in Nabq is just above £40,000 while in Naama Bay it will start at £52,000.

Regardless, of where you buy in Egypt, raising finance is a challenge. "There are some Islamic mortgages available but the terms tend to be expensive and the conditions difficult," said Sean Adams, an international manager from Savills Private Finance. As a result, says Mr Adams: "Most people are cash buyers or will borrow against their UK homes. In the long run it works out cheaper and a lot less hassle."

Another factor to consider as a buyer is long-term political stability. Egypt has been in essence a one-party state for generations, but the recent experience of Tunisia shows that such systems can be vulnerable to grass-roots movements.