Sunday, October 21, 2007

Hurghada Property & Red Sea Real Estate

I have been a bit quiet over the past two weeks on this blog and wanted to give you a sneak peak as to why this has been the case.

Propertastic! has been very bullish about the opportunities presented by investing in Hurghada property and Red Sea Riviera real estate and so decided to take a trip out to the area to see what is actually happening on the ground as there is only so much one can learn from online research. We visited Hurghada from 9 – 18 October, during which time we spoke to a wide variety of people involved in the property business – developers, real estate agents, lawyers, builders, etc. to get opinions of the current state and the future of the market there.

I am still working on the full report where I will go through each of the districts in the Greater Hurghada area and describe the developments and opportunities in each in detail but, as a taster of what is to come, here is the introduction to the report showing my initial impressions of the place:

Initial Impressions

The first surprise that we discovered is actually how incredibly close to the centre of Hurghada the airport is. OK, so I had seen a map and knew that it was not that far away, but it still came as a surprise to me when we were in our mid-town hotel in under 10 minutes after leaving the airport. This came as a nice surprise compared to our last trip overseas, to Alanya in Turkey, where we had to endure a two hour coach journey each way from the airport to the city and back.

No sooner had we left the airport when we saw the state of the construction boom. I expected there to be a fair amount of construction going on, but not that much. In a previous blog entry, I predicted that Hurghada would, sooner or later, turn into another Dubai with construction everywhere you look. Little did I know when I wrote that a month ago, but my prediction had already come true before I even said it. The differences between Dubai and Hurghada though are:

(a) There are no high-rise buildings in Hurghada. The maximum height of any building is five-stories.
(b) As much as property prices have increased since the start of 2007, they are still a lot cheaper than in Dubai.

Still, on the short journey from the airport to the hotel, every 100 metres we seemed to pass the concrete carcass of another new development, or a large hole in the ground awaiting the laying of foundations.

I expected Hurghada to be a lot bigger than it really is. The current population is around 40-50,000 making it half the size of Alanya in Turkey. One of the sales agents joked that Hurghada is a city that is 30km wide by 500m deep. Although this is a little of an exaggeration beacuse it is deeper in the older parts of the town, it’s actually not far from the truth – the newer parts of the city are probably only 200m deep.

I actually found it quite amusing seeing some of the marketing hype for some developments proudly claiming that the development is ‘only’ 700m from the sea. This basically means that it is on the complete opposite edge of the town in most instances – the airport isn’t much further than 1500m from the sea after all.

Another big surprise was that, even though you are only ever a few hundred metres from the sea in most instances, no matter where in Hurghada you are, it’s very difficult to access it. In Hurghada, it seems as if the sea is a very jealously guarded resource, even though there’s 30km of it available.

Pretty much everywhere I have been in Europe, beaches are seen as something that are public property, free for the use of everyone, or available for a token fee if you want to hire a sun-lounger. Then behind the beach is a promenade and/or a road, with the hotels or apartment buildings on the other side of the road.

This is not the case with Hurghada though – the beaches are actually owned by the hotels or the apartment developments and there is no way that you can take a long stroll down the beach as you have to stop when you get to the next hotel or development’s piece of territory. An example of how jealously some places guard their piece of beach can be found at the Seagull Hotel – one of the earliest and most famous hotels which is right in the heart of the main tourist drag in Sekalla. We went in to ask if we could have a drink at the bar. We were told that, if we wanted a drink, then we could sit in reception and they would bring us some. Come on! I fully expected us to pay way over the odds for a drink on the beach, but what did they expect us to do with their seaview? Steal it from them?!

While this is annoying for the standard tourist, it is a very important and useful factor for prospective property buyer to bear in mind because it means that property with direct access to the beach is always going to be at a premium in Hurghada. Logic says that the town is going to grow deeper and deeper over time as developers search for new land to build on, but spare beachfront land within the current region on Hurghada is already very limited, so is always going to fetch a premium.

Some more general observations about Hurghada …

I was very impressed with the weather during the time we were there. Being a pasty-white Brit, I have a problem if the weather gets too ridiculously hot. While we were in Alanya in late July, daytime temperatures were usually around 40C and I spent the whole time sweating like the illegitimate lovechild of Elvis and Barry White and had to take great care not to stay out in it too long for fear of getting burned to a crisp. In Hurghada, however, day-time temperatures while we were there always hovered around 30C. This was fine both for me and for my sun-loving girlfriend as it was plenty hot enough for her to top up her tan.

In the evening, I feared that it would get a bit too chilly as this is often a problem in the desert (as I discovered on a trip to Dubai in January where I was freezing cold soon after the sun went down). Night time temperatures were always around 20C or just under, which was perfect for wandering around dressed normally.

Some friends of mine who visited Hurghada a while back had complained that they didn’t like the place as it was dirty and downmarket and so this is what I expected to see. In parts of the town (Dahar and Sekalla) this was certainly the case. But it seems as if Hurghada has learned from their past mistakes as the newer parts of the town were very nice and clean – much more pleasant than I expected and better than anything I had seen in my other trips to the emerging Mediterranean (Alanya, Turkey and also on a previous trip to Tunisia a few years back).

Another thing I feared is that the local Egyptians would prove to be a complete pain in the neck, constantly harassing you as you pass by to buy whatever piece of tourist tat they offered in their shops. While there were plenty of salesmen who come bounding up to you with the standard ‘Hi! Where are you from?’ opener, they were a lot less persistent than their Turkish and Tunisian counterparts.

I was impressed with the range of activities that are available in Hurghada as there is a wide range of activities available for everyone. The water sports – the diving, snorkeling, kite-surfing, etc., which is what made the Red Sea famous in the first place, are obviously there in abundance. The beaches are a lot less crowded than I expected them to be, even the public beaches. This made a nice change from Alanya where it was difficult to find a spot on the beach where you weren’t always just a few inches away from the person lying next to you.

Families are catered for with a couple of waterparks, bowling and activity centres just for the kids. I was actually surprised at how few children I saw during my time in the town, but perhaps families prefer to simply stay in their resorts instead of getting out and about a lot exploring.

Late teens and twenty-somethings were also well catered for with a pleasantly wide variety of pubs and clubs. It was quite a surprise to find places as cool as Ministry of Sound, HedKandi, Hard Rock CafĂ© and Havana Club there already, plus the very exclusive (and expensive) Little Buddha – a sister operation to the famous Buddah Bars of Paris and New York. There were also bars and restaurants catering for all tastes, including an Irish Pub, naturally.

I was also quite amazed at the amount of extremely large (and obviously expensive) yachts that were moored in the Marina and out in the sea. I have no idea who they belonged to and where the owners go when they are on land as there seemed to be few places for millionaires and oligarchs to feel completely at home in ludicrously exclusive and expensive restaurants and clubs. Even the most luxurious of the resorts were very affordable compared to even mid-market hotels that you would find in Dubai, for example, so I can’t really imagine that the owners of these yachts would particularly want to mingle with us middle-lass hoi-polloi.

In general though, whatever the age group of the visitor, there is going to be something in Hurghada to entertain them, although maybe less so for the older generation of retirees.

In general, prices were lower than I expected them to be. These days my benchmark prices are Eastern European prices rather than those in the UK. I didn’t find Turkey to be particularly cheap, but I was pleasantly surprised how affordable Hurghada was in general (although it is possible to spend some serious dough at the more upmarket places). Being a Muslim state, alcohol was a notable exception to the generally low prices. Beer is readily available in most places (although quite a few restaurants are completely dry) prices at around EUR2.00 a pint. Spirits were harder to find and more expensive though – around EUR6 a pop. They also seem to be impossible to get hold of in regular shops and supermarkets and only available in the hotels and better-stocked bars.

The mix of nationalities to be found in Hurghada also came as a bit of a surprise to me. A very large proportion of the tourists were Russian, with many Eastern Europeans – Poles, Czechs, Slovaks, Ukrainians, etc. – also in attendance. This is perhaps not too surprising when looking at Egypt’s position on the map. Eastern Europeans really have no other closer alternative for winter sunshine, whereas Western Europeans have guaranteed winter sun closer at hand in Morocco or the Canary Islands. Italians were one of the first nationalities to start visiting Hurghada in their numbers, but there seem to be less of them there now. The remainder of the tourists were spread from throughout Western Europe – Germans, Dutch, Scandinavians, etc. The British seem to be in a minority currently, but it looks as if they are becoming a more and more important part of the tourist mix, especially now that the word is out that there are good possibilities for property investments in the region.

Despite this jumble of nationalities, I was quite surprised at how empty Hurghada seemed while we were there as I expected the place to feel a lot more bustling and crowded than it was. We didn’t see a traffic jam in the whole time we were there and, apart from in Sekalla at times, the pavements were easy to walk down without having to barge through a throng. Maybe it was especially quiet while we were there as our visit coincided with the end of Ramadan when few of the local Egyptians were working and were away with their families. The numbers of tourists milling around seemed a lot lower than I expected as well. We did a tour of the clubs on a Saturday night and they were mostly very empty. OK, so it was right at the start of the tourist season (we took the earliest charter flight that we could get out there), but still we found it hard to get accommodation as everywhere was booked already. Certainly the airport coming back was completely packed with tourists flying in and out of the place. So where the hell were they all hiding? Perhaps a lot of them are less adventurous than us though and rarely ventured outside the all inclusive sanctuary of their luxury resorts for fear of discovering what the ‘real’ Egypt looks like.

The lack of more tourists did start me worrying that yields are going to be going way down as more and more property is finished, but we’ll talk about that in more detail later.

To conclude my general observations on Hurghada, I have to say that I was very pleasantly surprised about it. I wouldn’t, by choice, go back to either Alanya or Tunisia again as I found them both to be rather dirty and boring as well as a little downmarket for my semi-snobby tastes, but I could easily see myself going back on holiday to Hurghada again, purely for holiday purposes.

That’s enough of the Rough Guide/Lonely Planet information to Hurghada in general. If you want more tourist information on the region, there are plenty of more detailed guides around. You’re reading this, I presume, because you want to know what the current situation with the property market is. Is it still a good deal? Where should you buy, where should you avoid and what kind of prices are you likely to be paying.

Hopefully I should have the main bulk of the report finished in the next two or three days where it will appear on the main Propertastic! site.
I will post a link to it from this blog as well so that you know as soon as it is up and ready to read.

Monday, October 8, 2007

Albania Revisited

Once of the most popular blog entries I have made to date is Property and the Tipping Point, in which I discussed the possibilities of investing in real estate in Albania.

In the article, I argued that I thought that it was too early for their to be large gains in property prices for a number of reasons, the main one being that there is very little tourism to Albania at the moment and I didn't see that there is the likelihood of their being much in the short-term.

Since I wrote that article, I have received some new information that I thought was worth sharing with you.

Firstly I was referred to some statistics from the Albanian Statistics Office to show that tourism is increasing to Albania. In 2004 there were 645,000 tourists visiting Albania, with the figure rising by 100,000 per year. These numbers are higher than I would have anticipated, but are still not that large by the standards of any of the existing markets.

Secondly, my girlfriend recently met with a developer from South Africa who had been touring Eastern Europe looking for development opportunities. He said that he visited Albania earlier in the year, but didn't think that the infrastructure was ready to start investing in the territory. He mentioned the fact that it was quite normal for the electricity to be out for a couple of hours each day. Not something that the majority of mass-market tourists are going to find acceptable (I certainly couldn't put up with it).

Instead he is planning on investing in Romania instead, a decision that we at Propertastic! would agree with as the climate for investment in Romanian property is currently looking very bright.

Most damning of all though was a recent article by Athena Kalaitzoglou which I discovered on the SMAnalysis blog written by Stavros Markos.

The article is entitled "Investment in Albania - High Risk" and mentions the fact that there is widespread corruption in the country and a severe lack of a legal framework.

It mentions that the government coffers are currently empty and so the country's finances are being supplemented by imposing fines on foreign investors for the most arbitary of reasons.

The article goes on to mention that there are often ownsership issues with regards to land and property. It is easily possible to buy some real estate, only to find that other payments are due down the line in order to clear up ownership issues, meaning that the overall cost can end up as being three times the initially agreed purchase price.

The article also mentions the same facts about power blackouts that we heard from the South African developer.

Another blog entry by a British expat who has been living in Albania's capital, Tirana, on July 4 also gives a similarly pessimistic view of the current potential for investing in the country. He has been living there for many years and so knows the market firsthand.

In summary, I am even more sure now that it is just too early for Albania to be a serious investment target, even though beachfront property is still very cheap compared to neighbouring Montenegro or Greece. Sure, if you have a large property portfolio it might be worthwhile making an investment as part of a longterm strategy, but it's going to be on a high-risk basis for a long time to come.

Saturday, October 6, 2007

Why Are Old Media Property Tipsters Rubbish?

This is related to my last posting about journalistic integrity and which news is worthwhile circulating and which is not.

Just three weeks ago, my search for news came across an article from the UK's Sunday Mirror entitled, "Is Turkey The New Spain?" While the information contained within the article is not wrong, it is written in the style that the journalist seems to believe that she is the first to think of the possibility of investing in 'a brand new, developing market'. Although she goes on to contradict herself by saying that there is already an oversupply in some parts of the country.

While Turkey is still a good market to invest in and there is definitely money left to be made there, people have been buying there for man years already and I consider it as one of the more established markets - certainly the most established of the 16 that we cover on Propertastic!

It's not the first time that I have seen the UK's old media (newspapers and TV) get all excited about some market that is already way, way past its initial growth period and is starting to mature, so that all of the fast money has already been earned.

It seems to be the same for all newspapers - even the 'quality press' such as The Times and The Daily Telegraph always seem to be way behind the curve when it comes to their property tips. It's very rare that I find anything in any of their property supplements that is real 'news' to me and is thus worth passing on to Propertastic's visitors. The most useful information always seems to come from the English language newspapers in the markets themselves such as The Sofia Echo, the Turkish Daily News and the Warsaw Voice, all of which produce some excellent and fresh information relating to their local real estate markets.

So why is this the case? This is a genuine question to which I would invite any comments upon, because I really don't have a clue as to why the newspapers are so laggardly with their overseas property market coverage. OK, the TV shows I can understand are never going to be cutting edge - they have long lead times and are there for 'infotainment' and not news. Monthly magazines are also going to be up to three months late with their news.

But for the quality press in particular, I am clueless. Their pieces are presumably written by professional journalists with access to a wide variety of resources. Most of them publish material only once a week and so they should have plenty of time available to make some detailed research on markets. So why don't they? The property pages of the newspapers are always packed full of advertising, so I would have thought that it would be very much in the newspapers' interest to provide great coverage in order to attract the maximum amount of readers to the section.

Maybe this gives a clue as to the real reasons though - to keep advertisers happy. It's better for them to write yet another article on major markets such as Bulgaria, Turkey - or one of the even older favourites such as Spain, France or Cyprus because they have plenty of existing and potential advertisers who want to see positive coverage of these markets. If they instead concentrated on real new hotspots such as Montenegro or Romania, then they have less advertisers to benefit from.

This is just a wild guess as to what their motives are. Honestly, I have no real idea as to whether it is an editorial policy, lazy journalism or what.

No, if you are really looking for tips as to where the best places are for investment, you are better off forgetting about traditional media and concentrating on the Web. Of course I rate Propertastic! very highly as one of the best sources of information, but I would say that, wouldn't I. After all, its opinions are mine!

But in the interest of fairness I would also say that there are some other good resources on the Web (not too many though) that give some excellent tips as to up and coming markets with the potential of making excellent and fast returns.

The ones that I rate highly are:

Property Secrets
Amber Lamb
Global Property Guide

There are also some interesting tips on the Totally Property forum if you take time to search for them.

But as for the old media, the only use for them I can see is to keep an eye on them to see what Mr. and Mrs. Average - the Johnny Come Latelies - are starting to get interested in. Because when the mass market is starting to buy in a big way, it usually means that it is time to start planning your exit strategy because this will be the last wave of buyers into a market before it starts getting totally over-exploited (such as Sunny Beach, Bulgaria). If you miss your chance to sell to them, you might not get another one without selling at a significant loss.

Please feel free to add comments if you disagree with my opinions - I am most certainly open for a debate on the issue.

Thursday, October 4, 2007

Journalistic Integrity

Every day I scour the Web looking for property news that's relevant to the real estate market in Eastern Europe and the emerging Mediterranean in order to add it to Propertastic's News Archive, and also because it's the only way I can personally keep abreast of all that is happening in each of the 16 markets that we cover.

I highly recommend that anyone who is looking seriously at investing in a particular market should skim through the last few months' worth of entries because it does give an excellent objective view as to the current status of each market.

At least it should be objective if I am doing my job properly, although sometimes it's not quite as easy as it sounds. Sometimes it's hard to differentiate between real news and PR spin. Other times it seems as if someone has an axe to grind.

Last Sunday I came across a brief article about the current state of the Moroccan property market which I found on the website of the North Africa Journal:

The bubble may not burst yet but the real estate craze that Morocco has been witnessing shows signs of stabilization, most likely on the temporary basis. There is a consensus as everyone in the real estate sector, from developers to bankers, recognizes that prices have gone through the roof, so to speak. So much so that potential buyers have decided they can no longer afford to purchase a home and prefer to adopt a wait-and-see attitude. Mortgage lenders have been among the first ones to warn that the prices of new housing units have been alarmingly exceeding the real value of those units. Driven by unscrupulous developers and their speculative investors, prices reached unprecedented levels that are such a mismatch to the current wage levels in Morocco. And while prices have not decreased yet, they have stabilized to begin to worry the main players in the industry.

Although the article was short on hard data and actual quotations from real people, I thought that it would be an interesting piece to add to our News Archive. The North Africa Journal appears as a reputable site and I thought that it would be interesting to get people thinking because virtually every other article that I have added about Morocco has been very positive indeed.

Less than 24 hours later though, I got the following email in from one of the leading agents covering Morocco:

Dear Nick,

Thanks for the email. But I must admit I am extremely annoyed by the article that appears on your website. It is completely misleading, talks about “unscrupulous developers” and contains no facts or back up for any of the statements made. It is completely irresponsible and the worst example for lazy journalism, indeed it doesn’t even look like it has been properly proof read (see last sentence). Can you explain who benefits from this? Not the client – who is being given wildly speculative, incorrect and unfounded information. Not the agent who sells in Morocco – for obvious reasons or any of the many reputable hard working developers who try to give a good service.

Can you ask one of your “crack researchers” to explain?

I look forward to hearing from you,


Far from being upset at the accusations, I was quite happy to explain our policy when it came to reporting news.
My reply was as follows:


Many thanks for your message. It’s good to hear from you.

Like other organizations covering particular markets online, we scour the Web constantly looking for articles that will be useful for our visitors – in our case individuals who are considering investing in purchasing property in Eastern Europe and the emerging Mediterranean.

We do write our own material and you can read
Propertastic’s own thoughts regarding the current state of the Moroccan market in our Overview section on the market .

As you will read, our own editorial thoughts on the state of the market are very positive. But they are the thoughts of just one organization – namely ours.

We advise our visitors to do as much research as they can
into a market before choosing which is the right one for them. We make it easy for them by republishing all of the news items that we believe are relevant to a market.

The item that you refer to was taken directly from The
North African Journal on 26 September. It appears to be a respectable online publication, as you can see for yourself [at their website].

While checking for news, I come across of a lot of sites that ignore any news from a market that is less than positive. Sure, I can imagine that it keeps their advertisers happy if that’s their business model or else it helps them to sell property if they are in the business directly. However, as a visitor to their site, I soon come to realize that the value of the information on their site is quite worthless if they only present one side of a story. Propertastic! would definitely be the poorer if we adopted a ‘good news only’ policy because it would be a significantly less useful resource for visitors.

I don’t think that any intelligent investor would dismiss Morocco as a potential market from this one article alone, but that they would rather consider it in context with all of the other news articles coming from the market, plus Propertastic’s own overview. As can be seen from our
Moroccan News Archive, the vast majority of news items that we have featured have been highly positive.

This situation is not unique to Morocco either – of the 16 markets we cover, all of them contain both positive and negative news items. In some territories, such as the Baltic States, the articles are overwhelmingly negative, but this reflects our own thoughts on the market.

So, in answer to your question as to who benefits – the answer is that it is the visitor to the site who benefits from getting both sides to every story. Although developers and sales agents might not like it if they get asked difficult questions as a result of these articles, but they should be easy to counter with cold hard facts, and I am all too ready to agree with you that the North African Journal article was very short on facts and very long on one reporter’s personal take on the current state of the Moroccan market.

Reading this article certainly hasn’t changed my opinion that Morocco is a good market to invest in. I doubt very much that it would greatly sway the opinion of any of our visitors either (because if they check the other 15 markets which we cover, they will find similar instances of the occasional negative article mixed in with the positive). After all, there is no such thing as a sure bet in property investment.

It is definitely a very interesting subject that you bring up here about the benefits of providing a full range of opinions regarding each county’s property market and I plan to write something on the next installment of our blog about it.

If you have any additional questions or comments, then I would be very interested in hearing from you.

Many thanks for taking the time and trouble to contact us and I look forward to hearing from you soon.

Kind regards,


The agent got back to me later that day with the following response:

Dear Nick,

Thanks for your very comprehensive and well argued reply.

I quite agree that there should be no censorship with regard to positive / negative articles. I ensure that we always tell clients that this is an emerging market sothere is an element of risk involved and that this risk is frequently enunciated by “negative” news stories.

My gripe was more that the article was so poorly referenced and sourced without even a name to back up any of the statements. If it had been properly accredited I would have no problem with it. It’s one of my biggest annoyances in the overseas property industry that there are too many lazy agents (bred in Spain during the boom years) who are all too happy to offer soundbites with no real factual basis. This undermines that whole idea of overseas property as a serious investment option.

Since this exchange, I have started to give the source of all of our news so that, if anyone disagrees with an article, they can take it up directly with the original authors of the piece. If anyone else disagrees with any of the news items that are featured on Propertastic! though, please feel free to take a few potshots at the messenger!

I am always interested in hearing your thoughts, and will also give anyone a 'right to reply' here on the blog.

Debate is always good.