2021 offers an uncertain real estate future

2 mins read

I wonder what prospects the real estate market has for 2021.

Who can predict with confidence how the market will perform during this year, which will experience all sorts of political and economic situations?

The year 2021 will continue to be affected by the pandemic, ever-diminishing government funds, the increase in unemployment, a sharp reduction in tourist arrivals (compared to 2019) and the political developments ahead.

This year we will have parliamentary elections with the various political parties exchanging or promising favours that will have their own impact on the real estate market.

Also, during this year, we will have to wait and see the pending approval of the 2021 state budget with the blackmailing and other matters that go with it.

It will not contribute to the proper development of the economy without excluding the possibility of rating agencies downgrading the Cyprus economy to the “junk” level once again.

This is also the year when we expect a new round of trying to restart the talks on the Cyprus problem where we should not expect major improvements as the signs of continued stalemate are there.

This will also add to the uncertainty of investments in the property market.

What will the policy of the newly elected president Joe Biden be and how will the relations between Turkey and the E.U. develop?

How will the situation of the banking institutions develop with the House intervening at all stages regarding NPLs and other matters?

On the ‘golden passports’ issue, it is clear that the abolition of the Cyprus Investment Programme will not only impact real estate investments but will also infrastructure projects, which include marinas, golf courses and others.

The interference on just about everything by the Auditor General has its negative effects as well, which are yet to surface (such as his recent stand on the passports issue in relation to the casino, Wargaming and other major investors).

Who will trust us in the future?

So, here we are and after the Cyprus economy benefited by €7 bln, from the passports with the main beneficiaries being lawyers, accountants, and developers, we now have a new internal wealth amassed by doctors and others related to the National Health System.

For example, a surgeon is now earning €30,000 p.m. from the GESY, whereas a recent report claimed three ophthalmologists had amassed €700,000 within just 6 months is shocking.

This is a new possible market source for investment.

In these times of uncertainty, how can we predict with any confidence how the real estate and construction industry will evolve during 2021?

It is certain that the real estate market, as regards local demand, it will continue as it did in 2020 for residential apartments, houses and plots in towns and suburbs.

Demand for high-end properties which is now frozen (at least those from abroad) will remain at the same level, with a 40% decrease in demand and as time passes, this figure may increase.

We also have to consider Brexit and how this will affect the market with many expat residents wishing to sell their properties in Cyprus (especially in Paphos).

Various details regarding pensions, healthcare, visas are issues that must be clarified by officials immediately.

The development of new projects is also an important consideration for the construction industry, with boutique town hotels (most likely not viable), the drop in the volume of tourist arrivals while the restart of air travel with Cyprus is a gamble in itself.

How do we move forward with all these uncertainties on the immediate horizon and how will the economy be damaged, what will the side-effects be on the banks and NPLs?

Is a new bail-in on the cards?

We all need to get together and improve this situation, by improving the governance of this country. For now, this is doubtful since it needs guts (Margaret Thatcher style), especially in an election year.

Nevertheless, among other measures I suggest:

  • Corrective measures on improving the efficiency of the Civil Service
  • Corrective measures regarding the operation of the local authorities for the illegalities they tolerate
  • A fast-track response to requests from new investors
  • Shocking embarrassments such as the recently published Olivewood film industry ‘scandal’ with well-known film producers who are still waiting to receive state reimbursements

I am often told by various “experts” of the economy and other sectors that Cyprus must not depend on tourism and services.

To which I ask you, do we have any alternative?