Cyprus property market: main trends in 2018

Russians are leaders among other property buyers in Cyprus

According to statistics for Cyprus, the share of clients from Russia remains still dominant. Cyprus is very popular among Russians due, first of all, to its location, climate, security, favorable business environment, low taxation system, and the absence of property taxes. And the local real estate market is very stimulated by the program of obtaining citizenship in exchange for investments that a foreigner can return within 3 years after receiving a passport - while Cyprus citizenship remains for life and applies to all family members and is passed on to future generations.

However, Cyprus’s residential and commercial property market reached its lowest point in 2015 (the crisis in Cyprus began in 2009) and only then began to gradually recover. Since 2015, the economy of Cyprus began to gain momentum, GDP growth was 4%, which is two times higher than the average European level of 2.2%, and the unemployment rate fell from 15% to 7.5%. Also an important contribution to the progress of Cyprus made the tourism sector, which is traditionally the most important donor of the economy in the amount of 25% of GDP. Over the past three years, the number of tourists has increased by a record 50%.

Certainly, the passport program, which is considered one of the most attractive in Europe, played an important role in restoring the real estate market. During its operation, Cyprus has attracted an additional 4.5 billion euros to the real sector of the economy, which greatly influenced the rise in housing prices and the change in the proposed product by local developers. The number of real estate transactions worth 1 million euros and more has increased fivefold over the past three years: from 169 objects in 2015 to 575 objects in 2017. During this time, dozens of skyscrapers with apartments costing from 2 million euros have appeared in Limassol, which has been actively developing in the last few years.

The cost of housing in Cyprus will continue to grow

Investors with capabilities began actively buying up entire buildings with apartments for subsequent rental - as a result of such actions, their yield varies from 5% to 8% per annum. In addition, this was facilitated by the fact that in the past year alone, the popularity of the Airbnb service in Cyprus has grown by 48%. Thus, most of the residential property being leased on a long-term lease was withdrawn into the short-term segment, which led to a rapid increase in rental rates, which over the past three years have doubled.

Based on this chronicle of events, over the past three years, prices have increased by an average of 15-20%, but have not yet reached the pre-crisis level of 2010, still yielding to these indicators by 20%. Therefore, the prices that are currently fixed on Cyprus property are far from the limit - there is room for growth, but experts predict a slowdown in the price growth. Most of all, an increase in land value is expected, especially on the first line and in the center of cities. For example, the real estate market of Limassol is already very “overheated”, therefore the dynamics of price growth will be lower there. High potential for price increases is predicted in the Larnaca regions and the tourist areas of Ayia Napa and Protaras.

In addition to actively working passport program, the possibility of crediting by banks for the purchase of real estate at a very low interest rate of 2.5-3% and a low down payment strongly influences. The continuing rise in prices for rental properties also attracts investors interested in obtaining high and stable rental income, the size of which no European bank can currently provide.

Cyprus has a low corporate tax, which attracts more and more foreign companies, which, in turn, open their offices and representative offices in Cyprus, bringing their employees along with families who need apartments and houses for rent. The development of the casino-related segment also attracts more and more foreign investors who are interested in acquiring luxury housing, which is currently being built in the form of skyscrapers ranging from 15 to 45 floors.

Of the most pressing topics on the agenda is the question of a more thorough examination of investors for the origin of funds for which they acquire property in Cyprus, after which they receive Cyprus citizenship. Due to future possible changes, experts in this area advise customers to hurry, if they want to get a Cyprus passport at the usual comfortable conditions. More recently, the government has already introduced a quota for the issuance of 700 passports per year and it is not yet known what other measures can be taken.

The most popular destinations of Cyprus

The most popular regions among foreigners are still Limassol and Paphos, they account for up to 70% of all sales. Recently, investors began to attract the Larnaca region. The main reason - property prices here are lower on average by 30% -40%.

Interestingly, Israel has recently become a big market driver. This is due to the discovery of a large gas field in Cyprus, which borders Israel. The unstable political situation in the Middle East is also influencing. And Cyprus, as you know, is considered one of the safest countries in the world. The other day, an Israeli company signed an agreement for an investment of 1.2 billion euros in the new port of Larnaca.

Also, investors are interested in building the largest casino resort in Europe and legalizing the gambling business in Cyprus. Chinese investors are actively investing in the hotel business, the Egyptian billionaire will soon complete a new yacht club and two skyscrapers in Ayia Napa, Russian investors are actively building high-rises in Limassol, and a large skyscraper project and a five-star hotel in the center of the Larnaca embankment have been announced. And since banks have reduced loan rates by half to 2.5%, this will allow local buyers to return to the market and will make the possibility of financing more attractive for foreign investors. Therefore, local experts say with confidence that in the next five years, the local real estate market will actively grow.

Buyers' preferences from Russia

Clients from Russia are divided mainly into two groups: those who are interested and buy objects for obtaining Cyprus citizenship with a transaction amount of more than 2 million and clients who buy real estate for personal use with a budget from 300,000 to 500,000 euros. By types of objects, the most popular are apartments within walking distance to the sea in gated residential complexes with a budget of 280,000 euros. Villas in the tourist area, as well as overlooking the sea, are on average more expensive than 1 million euros.

Obviously, the investment attractiveness of Cyprus has grown: this was due to both the rise in property prices in general and the growth in rental real estate, including due to the high influx of companies in the field of IT technologies, financial and investment companies, and for a favorable tax system, business conditions that Cyprus provides for non-residents. There are no particular problems for customers of Cypriot banks to wait, if the activity of the company or the source of funds of an individual is clear to the bank - when there are no issues with payments and transactions. There is no general closure or blocking of accounts in Cyprus. Based on statistical data, those who bought property only in 2017, already now clearly see their capitalization in the form of receiving rental income or resale. Cost and demand are constantly growing, we are not talking about those buyers who received their Cyprus passport thanks to the launch of this state program in 2014. Now there is still an opportunity to buy good liquid objects in the secondary market, but there are not so many of them. In the general array of proposals appear new projects at the foundation level, as well as a lot of interesting projects in Limassol, which also may be of interest to investors.

Dinara Gracheva, HomesOverseas.ru