Investment Returns in Sharm El Sheikh
Where the best opportunities lie, and how to calculate them yourself
Over the past decade, Sharm El Sheikh has transformed from a well-known tourist destination into one of the most important real estate investment hubs in Egypt. What sets it apart from markets like the North Coast or Ain Sokhna is the nature of its demand: while many areas rely mainly on Egyptian buyers, Sharm El Sheikh attracts tourists from Russia, Europe, and Arab countries almost year-round, giving its investments relative immunity to local market fluctuations and making a large share of the return come from a steady stream of foreign tourism.
This diversity in demand sources is what makes the question of the "best investment return" in Sharm El Sheikh a fundamental one for any investor considering entering the market.
Why Are Returns in Sharm El Sheikh Among the Highest in Egypt?
The high investment return in Sharm El Sheikh is linked to several combined factors:
- Continuous international demand: Unlike seasonal coastal cities, Sharm El Sheikh operates as a year-round tourist destination, reducing slow periods and raising occupancy rates.
- Diverse tenant base: From foreign tourists to Egyptians living abroad, giving greater flexibility in pricing and leasing.
- Advanced infrastructure: An international airport, modern roads, and world-class resorts that sustain investor appeal in the area.
- Growth in licensed tourism housing: Sharm El Sheikh currently leads Egypt in the number of officially licensed tourism housing units, with a total exceeding 41,000 units, ahead of other areas such as North Safaga on the Red Sea.
Hospitality sector reports also indicate that rising average returns per hotel room, accompanied by strong increases in occupancy rates, are encouraging financially strong companies to pump new investments into these areas despite the rising cost of market entry.
Return Analysis by Area
Investment returns are not distributed evenly within Sharm El Sheikh itself; each area has its own character that determines the most suitable type of return for it.
Naama Bay: The Highest Rental Return
Naama Bay is considered the beating heart of Sharm El Sheikh, serving as the main hub for tourist and commercial activity, home to restaurants, cafes, and luxury resorts, in addition to being very close to the international airport (about 10 minutes by car). This central location makes it the top choice for anyone seeking a high return from daily or seasonal rentals, though it comes with higher entry prices than most other areas and greater crowding during tourist seasons.
Nabq Bay: Faster Growth at a Lower Entry Cost
A relatively quieter area, Nabq Bay attracts large real estate development projects (including massive projects from major developers such as Talaat Moustafa), with initial prices lower than Naama Bay. This makes it suitable for those seeking medium- to long-term returns, with the potential to benefit from future price increases once new projects are completed.
Al Hadaba: For Permanent Housing and Long-Term Rentals
An area more oriented toward permanent housing, suited to investors seeking a stable, long-term rental return rather than quick seasonal rentals.
Al Ruwaisat, the Old Market, and Shark Bay: Opportunities at Lower Entry Prices
Relatively cheaper areas that can deliver a good return for those who buy early, before development is completed, though demand and liquidity levels are lower compared to Naama Bay or Nabq Bay.
Which Return Are You Looking For?
Choosing the "best area" actually depends on the type of return you want:
| Most Suitable Area | Goal |
|---|---|
| Naama Bay | Fast, high rental return (daily / hotel-style rental) |
| Nabq Bay | Long-term return with lower entry cost |
| Al Hadaba | Permanent housing or long-term rental |
| Al Ruwaisat / Old Market | Low-price opportunities in early stages |
How to Calculate Investment Return
Before comparing areas by the numbers, you need to understand how return is actually calculated. In real estate, there is more than one metric, and each answers a different question.
1. Rental Yield: The Most Important for Investors
This is the basic metric that tells you: "How much does this unit bring back per year in rent, compared to its price?"
Gross Yield:
Gross Yield = (Annual Rent / Unit Purchase Price) x 100
Example: If you bought an apartment for EGP 3,000,000, renting for an average of EGP 20,000 per month (EGP 240,000 per year):
Gross Yield% = (240,000 / 3,000,000) x 100 = 8
2. Net Yield: More Accurate
The problem with the previous metric is that it ignores expenses. Net yield calculates rent after deducting all costs:
Net Yield = [(Annual Rent - Annual Expenses) / Purchase Price] x 100
Expenses you need to calculate:
- Maintenance fees
- Management company commission (if renting through a broker or platform)
- Electricity and water during vacancy periods
- Insurance
- Periodic maintenance (air conditioning, furniture, etc.)
Same example after deducting annual expenses of EGP 40,000:
Net Yield% = [(240,000 - 40,000) / 3,000,000] x 100 = 6.67
Notice that the difference between gross and net yield can be significant, which is why "10% return" figures you see in some developer ads need scrutiny.
3. Total ROI: Also Accounts for Price Appreciation
This adds another very important factor specifically in Sharm El Sheikh: the rise in the price of the unit itself (Capital Appreciation), not just rent, over time.
Total ROI = [(Annual Rent + Increase in Unit Value) / Original Purchase Price] x 100
Example: If the same apartment you bought for EGP 3,000,000 is worth EGP 3,300,000 after a year (an increase of EGP 300,000), in addition to net rent of EGP 200,000:
Total ROI% = [(300,000 + 200,000) / 3,000,000] x 100 = 16.7
This explains why areas like Nabq Bay can be attractive in the long run, even if their current rental return is lower than Naama Bay, because the likelihood of price increases as projects are completed is higher.
4. Payback Period
A simple measure showing how many years it will take to recover your money from rent alone:
Payback Period = Purchase Price / Net Annual Rent
In our example:
Payback Period = 3,000,000 / 200,000 = 15 years
Practical Tips When Calculating
- Always ask about the actual occupancy rate in the area (not the advertised one), because a vacant unit for part of the year significantly reduces the real return.
- Distinguish between the "expected return" a developer quotes and the "actual return" from similar units already in the market.
- Calculate expenses fully before comparing two areas, since an area with high maintenance fees may have a lower net return than another area with cheaper rent but lower expenses.
The decisive factor in any investment decision is comparing actual occupancy figures and current rental rates from more than one developer or real estate broker before buying, as the numbers constantly change depending on the developer, unit type (hotel or residential), and overall market conditions. This article provides a general framework for understanding the market, not a direct investment recommendation.
