SUPPLY-SIDE in recent years saw an increasing pipeline of high-priced residences come to the market with values derived primarily from the Cyprus Passport Scheme benefits rather than any Real Economy market drivers.
The main bulk of buyers for these passport properties have been Russian and Chinese citizens but demand has waned increasingly over the last 12 months.
Chinese activity has been almost absent from the market since the onset of COVID-19 in December 2019 introduced severe restrictions for potential buyers to travel to the island and made it impossible for many to send funds to complete purchases.
The new reality since the lockdown in Cyprus is that all sectors of the real estate market have come to a standstill and many transactions already agreed in principle or even midway through have been frozen or postponed.
Many developers with their finger on the pulse had been scaling down activity during 2019 but many others who got late into the development of residences for passports (particularly multi-unit towers) have a large stock of unsold units.
Developers are now planning to change use from residential to office or hotel accommodation which they hope will be in greater demand when the market starts to move again.
With construction now at a standstill, there is a multitude of projects that are unfinished.
The prominent marina, casinos and Larnaca port projects will all suffer in the short-medium term.
This can only mean a softening of pricing through the market, but quite how low prices will fall remains to be seen.
One thing is certain – the task of valuing a property just got much, much harder.
The Retail sector will be hit most both in terms of a halt in the expansion plans of the Retailers as well as a reduction in rental values imposed by the Government to help the Retail Sector survive after the lockdown and loss of considerable income.
The Residential market will also bear the impact of the lockdown since Foreign Investors will be reluctant to invest in foreign markets due to the general insecurity and problems in their home countries as well as the revision of the Investment Plans (for Cyprus, foreigners accounted for 50% of the buyers in many cases).
Limited buyers
Limited demand on behalf of Cypriot buyers due to the rise in unemployment and the reduction in banking financing through loans will also lead to pressure on prices.
Interest in the big Marina projects will be influenced and it will take a while to re-gear the investment programs and communicate it.
I believe 2020 and 2021 will be two difficult years and the government will need to step in and create the “investment environment” to bring back interest in the Cyprus Market.
The Russians, Chinese and Israeli demand will be on hold at least for 2020.
The loss in demand for Airbnb will bring a reduction both in the sale and rental values.
The rate of the reduction in prices will be based on when the demand will start again and what incentives the Cyprus Government will be willing to give.
The Office market is a big question since this lockdown created a new “working from home” trend and companies saw that employee’s productivity can be at the same level and even higher from home.
This will lead Organizations to reconsider their plans for new offices.
Logistics, Warehouses and Industrial have benefited from this crisis due to the massive increase in e-commerce.
The real estate market (which is always a good investment market to have in mind) is expected to rebound in 2021.
About the author
Panos Danos is the CEO of Danos/BNP Paribas Real Estate and has a Bachelors in Land Management and Development and is a Fellow of the Royal Institution of Chartered Surveyors. He is a registered valuer of RICS (VRS), member of Investment Property Forum (IPF) and a Chartered member of the Society for the Environment.
I’ve only had property in Cyprus for 10 years – I bought a flat off-plan and still consider myself very lucky, but… it was not, and never will be, considered an investment.
Off-plan = cheap, mostly because I didn’t need to buy a passport.
I still love Cyprus for all its faults – wonderful, warm people who appreciate friends and family above all else. It is not the place to be if money is your No. 1 concern – bring your wealth with you because you won’t find your fortune here.
It really makes me smile when I see the very large posters encouraging you to “Invest in Cyprus”
What Tosh.
Should you invest in property in the expectation of an increasing value over time, then this is not the place for you. The current value of my detached villa with a pool is €10,000 less than the prices paid for it 12 years ago.
So long as the government continue to flood the market with building permits, then values will never increase. It is also the case that their strategy will create more empty or declining communities. Pegia is showing signs of overseas population contraction, with many unsold properties.
The best you can hope for is to recover something by way of rentals
Well said John Chadwick!
I could say alot more about this subject but best left unsaid.
Spot on. I could never have said it so plainly and succinctly. Being a remote owner you get even less.
Clearly whoever wrote the headline did not read the article.
Consider these facts:
– End of capital flight from China
– End of Capital flight from Russia
– End of Double taxation is end of Cyprus service economy.
– Oil price collapse is end of Gas dreams
– Global trade and shipping collapse means loss of jobs in ship management
– No one knows how many airlines will fly in 2020 and 21? So do not hold your breath for tourists to flock back unless you expect them to swim from Greek mainland.
– The pandemic might be checked but not over. The curve may flatten but tourism business as usual? Nah !
– With unemployment in most European countries touching 15% who has money for luxury real estate and an expensive Cyprus holiday?
– Forex business is almost finished
– There will be no students coming for fake education from Asian and African countries anymore – they do not have money to pay fake colleges and agents.
– There will be no demand for rental housing because expats in Forex, Shipping, IT will be leaving soon.
– Hotels will fight against AirBnb and not allow tourists to book cheap private accomodations.
– Expect banks to face a big crisis by end of year as NPLs of hotels and businesses hit a record high.
So unless Cyprus public sector employees start buying homes, there is no hope for luxury real estate for the next 5 years.
Hi. Do you think that the market will be more accepting for low budget investment such as 120-160k.
Statement about rebounding of real estate market in 2021 is just manipulation or poor PR. Nobody actually knows or has any strong arguments to make statements about time of real estate market rebounding. Shame on the author for manipulation of readers.
You’ve been selling over priced property for years, most are poor quality buildings and no after sales we paid you and no response when we ring your company to make good your poor building’s. This is typical of Cyprus developers?