PROPERTY sales in Cyprus have fallen by 6.6% since June following the introduction of stricter criteria for the Citizenship by Investment scheme, which critics claimed undermined the fight against corruption in Europe and increased the risk of money laundering.
Earlier this year property sales surged as foreign investors rushed to buy property in Cyprus before the government introduced stricter criteria. But now, following the reduction in sales, economists are sounding alarm bells over the real estate industry’s reliance of foreign investors seeking Cypriot passports.
According to reports, tens of passports have been issued since May compared to the hundreds issued earlier. (Cyprus has issued around 2,000 passports to foreign investors since the scheme was launched in 2013.)
Economist Marios Clerides told Stockwatch that the decline since May could be attributed to the tougher criteria as many foreigners wanting passports could no longer comply with the conditions necessary.
“The evidence shows that the real estate sector would be in trouble if not for the crutches provided by the passport scheme,” said Clerides.
He added “The industry is not viable without the investment scheme, and we have to be cautious as the EU and other institutions are keeping a close eye on the scheme.”
He also argued that the economy has to find real sources of revenue and growth rather than relying on “artificial and transient” sources of revenue.
The impetus given by foreign investors in construction and related services has kept the growth of the Cypriot economy at relatively a high level.
Figures from the Cyprus Statistical Service show that around half of this year’s growth in the economy during the first six months of the year came from the construction, professional, scientific and technical services sectors.