Cyprus’ Citizenship for Investment scheme, which has fuelled economic growth, may soon be hitting a saturation point with developers and stakeholders beginning to worry over the future of construction.
Despite applications from foreign investors eyeing a Cyprus passport closing in on a new record this year, interest has slowed after the introduction of a stricter set of criteria, leaving developers concerned as a large number of high-rise projects have either kicked-off or in the planning.
As of 15 May, stricter criteria included an investment of EUR 2.5 mln and a EUR 75,000 contribution to the state Land Corporation and another EUR 75,000 to the Innovation Fund and tighter due diligence procedures which are expected to exclude many investors.
Developers fear that tens of towers and thousands of luxury apartments will flood the market as demand sharply drops, leaving these flats unsold, and them facing losses in the millions of euros.
Stakeholders are even more concerned now the scheme has been tarnished following reports that members of the Cambodian elite obtained Cypriot passports without proper checks.
Combined with the fact that Greece is set to launch its own CIS scheme, pressure on the industry is expected to increase.
Chairman of the Association of Land Development and Construction Businessmen and
Leptos Estates managing director Pantelis Leptos told Stockwatch there is already a stockpile of unsold luxury properties.
“More or less, developers have managed to sell apartments in older projects. However, I don’t believe that developers of newer projects have sold any flats,” he said.
Leptos expressed moderate optimism about the future of the programme, stressing that if there was no demand there would be no supply.
The Chairman of the Association of Land Development and Construction Businesses also said, "some luxury apartments can be sold to locals or to foreign businessmen who simply wish to acquire a modern apartment with a beautiful sea view".
More concerned than Leptos over the introduction of tighter criteria in May is the chairman of the Association of Property Valuers, Polis Kourousides.
“We are barely able to sell one passport a month”.
He said since the introduction of the new criteria, sales have dropped dramatically and believes the Cypriot investment scheme will struggle as investors turn towards Greece and its citizenship programme.
Kourousides also predicts that sales will drop sharply in the coming years and as a result, a large number of apartments, especially in Limassol, will remain unsold affecting property values in other areas.
He disagreed that these luxury apartments could be bought by business people looking for a luxury apartment or put on the local market, noting that "these cases, if any, would be but a handful".
Chairman of the Cyprus Property Owners Association, George Mouskides said the situation could take on dramatic proportions as the number of investors eyeing a citizenship scheme is dropping internationally.
Vice-President of the Valuers Association Andis Telemachou said: “We are one step away from seeing the saturation of citizenship for investment.”
“This comes as a result of the stricter measures imposed by the government, as well as fierce competition, in particular from Greece, while interest in the Cyprus investment program seems to be diminishing.”
He said that stakeholders are sceptical over the future of the market, especially in Limassol where luxury apartments have been left unsold.
Telemachou said problems will arise further down the road due to what he called a ‘time-lag’ between the time when a project is submitted to the authorities and the time developers can begin building.
Due to red tape developers need to wait at least one year before they obtain the necessary permits.
“When the crisis hits, developers will not have time to react as they would have already bought the land and materials and could have already started building.”