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The real estate slump in Cyprus started end 2008/early 2009, which was followed by the 2013 bail-in with the known results.
These caused a depression in the market, which continued with a constant reduction in real estate values, with the signs of a revival starting late 2016/2017.
The revival came about as a result of the improvement of the economy, the commencement of financing by financiers, improved tourism and shipping, as well as the visa/passport investment scheme.
Real estate demand in Cyprus comprises of locals (including E.U. members) and foreign (non-EU). The former amounts to approximately 60% of the total demand and the latter 40%.
These numbers are in terms of units demand, but concerning values/cost, we would speculate that foreign demand at present, is at least at par with the local.
Regrettably, detailed statistics, be they available, are not analysed by the Land Registry in detail, so out of the 60%, we do not know how many are Cypriot and how many are other EU nationals.
Neither we know if a Cypriot Co acquisition is, in fact, a foreign-controlled firm. So, there is confusion.
Local (Cypriot) demand directs itself mainly towards apartments (in the region of €150,000-€250,000) for new properties, but there is a notable increase in the demand for older apartments within the towns and their periphery.
These older units sell at least 30% less than new ones (no VAT), they are in locations where new units are not easily found.
The average size of apartments in highest demand are mainly 2 bedrooms (around 80 sqm) and 3 bedrooms (around 110 sqm).
Average sales price of apartments is €1,200/sqm (in residential areas) and around €2,000-€2,500/sqm prices for new ones.
In terms of houses, demand by locals is mainly directed towards units in ½ building plots with an average size of 200 sqm with an average value of €1,500-€2,000/sqm in residential areas.
Shop demand is also picking up, be it at a slower rate in selective commercial areas, such as highstreets, seaside locations, proximity to marinas, having as the main preference of around 80 sqm (plus mezzanine) in size.
Offices of a high-tech nature seem to be in demand also, mainly in Limassol rather than in other towns and the preferred size is around 150-200 sqm, with a value of €3,000-€4,000/sqm, depending on the facilities provided.
Popular areas in Limassol such as close to the seaside could reach €5,000-€6,000/sqm (new ones) or even higher.
Land and building plots are a very slow market save those plots which are suitable for income-producing after their development, e.g. close to urban centres or near colleges/universities.
Agricultural land has not shown any signs of improvement, neither is it expected to improve in the short term.
Generally speaking, there is an abundance of supply, considering the foreclosure sales, both by the financiers (NPLs) and the various investment funds that have acquired large chunks of real estate from debt swaps (see APS, Altamira, Gordian).
Tourist projects (hotels/hotel apartments) show an increased demand as well, following the recent good tourist years, but much of its sustainability will depend on the international/local tourist trade (see Black Stone in Greece).
Returns (gross) on real estate investment is approximate as follows:
Apartments 3%-4%
Houses 2%
Shops 5%-6%
Offices 5%
Industrial units 4%
Hotel projects 10%
The returns expected are quite attractive, as compared with deposits at banks (prevailing ½%-1%) which show a reduction and even negative interest charges.
This coupled with the weakness of some of the local banks in terms of their sustainability, worries cash depositors who turn towards real estate mainly in Cyprus, but also abroad.
The foreign market now directs itself mainly to high-end residential properties and, to a lesser extent, for offices to house their operations.
Preferable sizes are 2-3 bedroom apartments and 3-4 bedroom villas, with facilities such as a private pool etc.
A lot of publicity has been given to the local sky-scrapers offering numerous facilities and which sell at anything between €7,000-€15,000 per square metre and for which there is good demand coming from all over the world ranging from India/Hong-Kong (recently) and even Cambodia!!
This is a rather high-risk investment, however, since foreign buyers must keep these units for 3-5 years themselves and also, those coming into the market (over 300 unsold units so far) will have competition from resales.
We expect the majority of foreign buyers do not intend to keep these units forever – evidence is the no-lighting for those during the evening hours.
The attractive investment scheme of the Cyprus Government, coupled with tax benefits (see recent tax discounts for high-income foreign employees) widely spoken English, the very low crime rate, are some of the attractions.
To the pending sales for around 300 units of such a nature (under construction and those in the pipeline), is in addition to the holiday units at the golf courses and marinas. This scheme which has provided an income for the Cyprus economy in the region of €6 bln, seems to be running into difficulties mainly caused by the greed of the developers.
Real estate in Cyprus has some problems to be solved, such as the lack of title deeds, the statutory tenancy laws, the common expenses, the dreaded red tape are some of them.
Of course, the prevailing situation is subject to the solving or otherwise of our political situation with our Turkish Cypriot neighbours.
