WHEN it comes to investing in real estate, the Cypriot market is considered to be an increasingly attractive investment destination, which has been gaining more and more importance over the past 15 years.
We should now concentrate to establish Cyprus as a transparent, easy, safe and straightforward country to invest in.
The real estate market is moving in cycles and consists of several stages, expansion, stagnation and contraction. Cyprus is now in an up-market phase of the cycle in all market segments.
For several years, the housing sector has been continuously recording the demand that is two times higher than the new offer.
Large Complexes with 40 or more units, which are also the primary choice of local but mainly foreigner buyers, imply a phased construction that carries a price increase of an average of 5 percent with each new phase, which motivates buyers to opt for purchases at the earliest phases of the complex, because it takes 2 to 3 years on average for the completion of the construction of the entire complex, and the value of the property purchased at the beginning means there is an increase in the value of this property by as much as 20 percent.
On the other hand, the activity in the part of the retail market where we have about 180,000 square meters of malls currently under design or construction is also impressive, and it will increase the total offer of such space by almost 50 percent within the following two years.
A similar situation exists in the office space market, where record levels of demand are also being recorded, creating the needs for new business buildings, keeping rent levels very high – so the investment risk needs to be reduced.
The relatively inelastic offer and the fact that, in relation to the demand growth at this moment, the offer takes a few years to respond to it with a specific product, are precisely the reasons why real estate investment is riskier than investing in other forms of assets.
In order to reduce the potential risk, investors must try to anticipate trends in parts of the market in which they want to invest and to assess how and in which way the fundamental economic indicators will flow on one hand, and, on the other hand, how will the supply and demand flow on the part of the real estate market which is interesting to them.
In other words, the excess supply of a real estate type may result in a fall in prices, especially if it coincides with a negative economic environment.
It is desirable to consult experts who are engaged in this business, so that they can assess from a professional point of view whether the real estate has the potential for improvement and, as such, be adapted for a wider circle of buyers or tenants – it should be noted that, in all likelihood, Cyprus is competing with other EU countries such as Malta, Greece or Portugal with its offer and quality of construction.