Cyprus Real Estate Developments, Current Trends & Predictions: August 2019
In light of several changes in the economy and consequently Cyprus property market; we have comprised an article of the most pressing real estate issues in Cyprus at the moment.
Including the latest investment trends; changes in land development issues and how amendments to the Cyprus Investment Programme may affect the islands economic prosperity in 2020.
1. The Cyprus government recently updated housing policies regarding land development.
The government has implemented new housing policies to ensure there is affordable housing in the Cyprus market. One of the new policies introduced is that affordable housing will be available at the average construction cost as printed by the Cyprus Statistical Service.
The new policies also included some new incentives:
- An increase of 25% in building concentration and the construction of housing units with affordable rentals.
- An increase of 25% in building concentration with the condition that 10% of the increased density shall be used for the construction of affordable housing units.
- An increase of 45% in building concentration, for plots of a net area of at least 3,000 sq. metres, on the condition that 20% of the proceeds shall be used for the construction of affordable housing units.
- Furthermore, new regulations have been approved in Cyprus Parliament for the increase of the subsidies for rent and mortgage interest payments which are prioritised for residents with low income.
2. Will the Cyprus residential market be able to handle a modest increase in the number of property investments?
Investment and financing in real estate certainly affects the Cyprus economy, however I wouldn’t say it determines it; the real estate market reacts to the island’s economic trends. At the moment, the market is quite well equipped as there is fierce competition, especially for residential units, and potential buyers are spoilt for choice.
There are certainly threats to the upward trend the market has been experiencing such as the recent changes in the regulations of the Cyprus Investment Programme and the financial solvency of Cyprus banks.
3. Are there any risks for a repeat real estate bubble in Cyprus?
These are just some factors leading to concerns that the past mistakes of oversupply will be repeated so of course there is a risk that the real estate bubble will burst again and looks to be experiencing some early signs. The real estate market is very volatile, especially in small countries like Cyprus; it’s not only influenced by the country’s and the region’s economic cycles.
The real estate portfolio of local banks is growing due to repossessions and debt for asset swaps and the effect of unloading these properties into the market is still unfolding.
4. How will the amendments of the Citizenship-by-investment program impact the interest in the scheme?
There was significant momentum up until mid-May this year; entire projects were sold out off plan in a matter of days and the ministry of Cyprus had to issue a circular allowing for applications to be submitted two months after the enforcement date of the new regulations provided that agreements had been executed and stamped by the enforcement date.
The momentum was lost shortly after the enforcement however, and the impact is already evident; international interest has curbed and there has been a small drop in applications and therefore in property sales.
5. Jurisdictions currently showing the most interest in investments in the real estate sector
The countries from which there has been extensive interest for real estate investment in Cyprus are:
- Arabic countries.
Interest in real estate changes and fluctuates according to the incentives available for real estate investment, both the global and local economy as well as events taking place in the region.
Economists are predicting that interest in Cyprus real estate will be limited due to a number of points including:
- The uncertainty caused by Brexit in a few short months.
- More Stringent amendments to the Cyprus Investment Programme (CIP).
- The difficulties faced by the banking system both in Cyprus and Eu-wide.
- Wars and tensions in the nearby regions (the Middle East).
- The drop in Cyprus tourism generally.
6. A potential buyer seeking to purchase a Cyprus property in 2019 should consider (depending on the type of property being purchased and its intended use) some of the following points:
- A technical and legal due diligence exercise should be concluded shortly after finding your property. During the legal due diligence process, you would need to examine 2 major points:
- Whether the vendor or developer has separate title deeds for the relevant property.
- Whether it is burdened with any mortgage and/or any burden.
- If a Cyprus property you have your eye on is under construction, a good idea would be to examine whether the necessary planning and building permits have been issued accordingly.
- Be wary of the financial solvency of the seller in the event the property purchased is under construction and should ensure there are adequate securities in place.
- Any third country nationals are allowed to purchase property in Cyprus for limited purposes. A written permission from the Cyprus Council of Ministers should be obtained by non-EEA nationals to obtain a property in Cyprus and transfer the title deed of that property on their names. Please note that the permit is currently only approved for the transfer and registration of a maximum of 2 immovable properties in Cyprus.
Read our full how-to guide on how to purchase a property in Cyprus.
Contact us for more information on any of the issues mentioned, we have a number of local property specialists who would be happy to help you.