Luxury real estate may see a dramatic downturn next year, as the Cyprus Investment Program is no longer available to foreign investors, plus the pandemic has made market conditions even worse.
A bad taste left by Al Jazeera videos pushed the retreat by foreign buyers further and may send prices spiralling to 2013 era levels.
Foreign buyers – who have helped fuel the push in premium homes and high-rise building apartments (mainly in Limassol and Paphos) – are on the wane.
According to DANOS International Property Consultants and Valuers, the volume of foreign purchases will see a sharp drop in 2021.
The reasons include limits on taking cash out of foreign countries, anti-corruption laws taking effect, market saturation, rising property prices, the lack of citizenship incentive and concern about the stability of the EU economy, market and political situation.
The Limassol real estate market should slow significantly as sale volumes across the town are expected to fall by at least 25%.
The average price for a high-rise tower apartment is expected to fall in the last quarter of this year and continue falling in 2021, as well.
If you look around Limassol at all these, 15-28 storey modern towers with starting prices at €6,000 per square metre for a luxury apartment, people living in Limassol, are not buying them.
Real estate sales in Paphos and Larnaca will also feel an impact.
Prices will also slow down for these locations due to multiple reasons, and again, mainly, because the interest from abroad has dried up significantly.
The driver of the Cyprus real estate business has mainly been Russia and China, with 35% of real estate business done in Limassol, historically coming from foreign investment.
If you look at the real estate market, we had a tremendous number of buyers who came in because of the Cyprus Investment Program and prices were down.
Now prices are much higher, both absolutely and due to previous demand.
Then there is European and USA political instability.
Also, because of the pandemic – economic uncertainty, we are seeing people in Cyprus, selling their property to save money or simply to pay back their bank debts.
It is serious – people can’t rely on their business for enough income.
That has probably been the greatest impact.
Then you have the Turkish occupation and provocations making a big impact on uncertainty.
In the current financial and political climate, Cyprus is viewed as not being as stable as it once was.
One source of funding for a percentage of buyers was “questionable money”.
With the gradual enforcement of legislation, however, forced identification of buyers in areas with many all-cash transactions that raised questions about money laundering led to a significant deterioration of “dodgy” buyers.
In real estate, there was the ability to protect the identity of the owner, but only when done for legitimate reasons.
For example, a celebrity might not want to attract crowds of gawkers. But now, even in those cases, the government insists on knowing the ultimate buyer.
For now, when it comes to upscale real estate, many properties that once would have attracted buyers shall sit empty until market conditions settle, a COVID-19 vaccine is available, and the Turkish provocations resolved peacefully.
About the author
Panos Danos is the CEO of DANOS An Alliance of BNP Paribas Real Estate, member of the Cyprus Valuers board of directors.