Cyprus’ macroeconomic performance throughout 2021 will remain under pressure, with downward annual variations in several indicators influenced by the ongoing pandemic.
However, when the health side improves, so will the economy, both on the demand and supply side. According to the latest real estate outlook publications by the European Commission, the Cyprus economy is expected to expand by 3.1% and 3.8% for 2021 and 2022, respectively.
Unemployment will gradually decrease to 7.2% by 2022, and inflation will record positive rates of 1.7% in 2021 and 1.1% in 2022.
Stabilising Covid-19 infections and achieving herd immunity will be the turning point for the Cyprus economy in 2021, signalling the start of the long uphill battle for complete recovery of the economy and the return to ‘conventional’, pre-pandemic economic cycles.
The cessation of the Cyprus Investment Program was a huge blow to the high-end real estate market.
There were significant drops in the number of transactions involving foreign buyers but, most importantly, a substantial decrease in the value of these transactions.
The construction sector is expected to adapt to new norms within the market, emphasising real estate targeting local demand.
Besides, it is predicted that local investment appetite will keep growing in search of yielding prospects in an environment of low interest rates.
Investment demand is strong, and there is capital available for real estate investment, although significant activity should resume after mid-2021.
Due to consumer mobility limitations, retail has recorded some of the most significant losses; however, consumers are back, but retail will have to reinvent itself post-pandemic with fundamental changes, including incorporating online shopping into their operations.
Other sectors expected to attract attention are logistics assets due to the increase in e-commerce and Grade A office spaces required to house multinational companies planning to relocate their headquarters to the island.
E-commerce soared with the pandemic, boosting logistics take-up and rents, as well as reducing yields. It was the star sector of real estate in 2020, and it is well situated on the investor’s radar.
Tourism will contribute significantly to the economic recovery, despite the fact we do not expect to see the numbers recorded in 2019 before 2022-2023.
The first tourist arrivals began last month, and as the weeks go by, more people are being vaccinated, and we will see more tourist markets being unlocked.
In addition, recent events regarding the conflict in neighbouring Israel and Turkey and Greece are still in bad shape epidemiologically, contributing to redirecting tourists our way.
The hotel sector is suffering the consequences of tourism’s paralysis.
Investment started promisingly in 2020 but has frozen due to COVID-19.
We have seen many hotel establishments either freezing their operations completely or working on a semi basis throughout the whole of 2020.
However, it is expected that the sector will rebound strongly and be a key contributor to the economy’s recovery.
About the author
Panos Danos is CEO Danos / BNPRE Group