Cyprus real estate sector will take a significant hit from the COVID-19 pandemic, as in times of uncertainty investors tend to minimise property transactions, experts argue.
With the novel coronavirus threatening to usher another recession, just 12 years after the last one, investors generally tend to be more sceptical and less willing to jump into agreements especially regarding real estate.
Nikolas Ioannou, from the Property Studies & Valuations Dept of Danos / BNPRE Groups, said: “This will result in a significant slowdown of the market in Cyprus, especially now that it has officially recorded coronavirus cases”.
He told the Financial Mirror that this could be devastating for the Cyprus Real Estate market, which is mainly supported by foreign investment and demand, a decent percentage of which comes from the Chinese market.
This compounds the devastating effects to the property market on a continuous downtrend since the implementation of stricter criteria on the ‘Cyprus passport scheme’ introduced in May 2019.
Already the market has started to record a significant drop in sales at the start of the year.
“Out of 742 properties sold in January this year, 30% was sold to non-EU residents. Sales to non-EU residents were down by 20%,” Ioannou said.
“Add to that the massive volume of new supply that has either just entered or is expected to enter the local market in the coming months as well as the thousands of properties the banks have repossessed and need to dispose of,” he added.
Ioannou said the short-term rental market, such as Airbnb, with thousands of properties, is expected to suffer from wholesale cancellations if the outbreak continues. Already cancellations have started to come in.
Rents may drop
This could have a positive impact on rents, as owners of Airbnb properties will be tempted to put them on the long-term rental market, pushing rents downwards.
All these factors, combined with the fact that the Cyprus economy is strongly supported by tourism, an industry which is expected to suffer the biggest losses.
“There are strong ingredients for a new recession, which is now more possible than ever, despite the fact we are in uncharted territory,” said Ioannou.
Chairman of the Cyprus Property Owners Association, George Mouskides told the Financial Mirror that the situation with coronavirus will definitely hurt high-end sales as apart from uncertainty prevailing in the markets, investors in some cases cannot physically travel to the island to see the properties first-hand.
“This could mean that a large number of sales may be put on hold.”
Mouskides noted that local buyers will also be affected, as Cypriots wanting to buy a home for their family will delay as they will be more concerned on protecting them, rather than making future house plans.
He argued that ultimately, it will all come down to how long the crisis will last.
“If authorities are able to contain the spread of the virus soon, we will probably be looking at a two-month market freeze. However, if this goes on longer, then the summer months may be affected too”.
He said it would need a few weeks before being able to make to clear estimates.
“We will have to take into to account the general damage that will be brought about to the economy”.