Asked recently about the rapid growth of high-rise apartments and building ventures in Limassol, the Chief of the Department of Lands & Surveys in Cyprus stressed that the only concern is whether the high demand will create another property bubble as history repeats itself.
The Chief also stipulated that if the Cyprus Citizenship by Investment and permanent residence permit scheme halt; so consequently will the buying demand. This will lead to some projects that have been constructed in Limassol becoming abandoned or unfinished, since the potential market for these properties are mostly foreigners. "We should not repeat the same mistakes made between 2006 and 2013, a period during which there was an excessive supply rather than demand on the island” he warned.
Capturing and analysing data on the Cyprus real estate market shows a steady upward trend over previous years, which is due to many factors, such as the return of confidence in the economy, the departure from the memorandum and the government's general recovery so far. Banks have also relaxed the terms of lending by offering loans at low interest rates, while the citizenship via investment scheme has helped stimulate the market in coastal towns, mainly Limassol and Paphos.
These two cities are leading in large expansions, as investments are made by predominantly Russians and Chinese, while at the same time many areas of Famagusta are being stimulated with renovations of hotels and holiday homes. "Currently, in Nicosia, most developments are for small residential units, as most of the work is being carried out in homes and on renovations." The Chief recalled, emphasising that there is a shortage of apartments in Cyprus, especially in the capital.
In addition, the real estate market, which is showing continually improved levels, is expected to further rise in property prices as well as rent, which shows particularly high levels of demand.
"There is a tendency for renting and leasing, as the domestic population prefers to rent as many residents are failing to secure easy loans while the cost of lending is high" he noted, explaining that Cypriots are now moving to the standards of northern European countries, in which residents and citizens are having to resort to renting instead of buying.
At the same time, there is a restriction on the availability of real estate, as most developers have not made enough progress on projects in recent years, with the result that increased demand will inevitably lead to rising rent prices throughout 2018.
According to the preferences of buyers and tenants, there is complex demand in all areas of the capital. "Preferences depend on the standard of living for buyers and tenants, since those with high earnings are looking for new buildings in good areas, and there are also families on the other side of the spectrum that choose older properties outside the centre."
Regarding the VAT on building land, this will increase the cost of buying a property, as tax on the land market will be imposed in addition to the construction tax, hoping that compensatory measures will be taken to avoid price hikes.