Recent years have witnessed a skyrocketing demand of high-priced properties introduced to the Cyprus real estate market, predominantly consequent to the Cyprus Investment Programme. The Cyprus business hub and coastal city of Limassol has seen a steep rise in the construction of high-rise buildings, residential and commercial property, with the industry being primarily supported by foreign investment and demand.
Current and forthcoming challenges
Given the rapid outbreak of the coronavirus outbreak and the new reality that finds the island still on lockdown, the real estate market and construction sector has also taken a pause and decrease in activity.
President Nicos Anastasiades announced on 29 April 2020 the blueprint for easing the lockdown. Daily outings have been increased to three, and civil servants are returning to work. The construction sector will start operations.
Taking into consideration that the property sector has been experiencing a downtrend since the implementation of firmer criteria on the Cyprus Investment Programme in 2019. The already immense volume of existing and upcoming projects available and entering the local market soon with properties also being repossessed by the bank, the industry is currently facing and further expected to face greater challenges.
A downward trend?
While Cyprus has gradually managed to substantially recover from the recession that hit the island 7 years ago, it seems that the Covid-19 pandemic is threatening to steer into a different albeit more complicated recession, thus finding certain potential buyers more reluctant to invest in the same manner into any business, particularly that of real estate.
Developers with a large supply of unsold residential property seem to be seeking for alternative selling options such as office and hotel accommodation, which may more likely be in demand once the market recuperates.
In addition, the recent ESTIA scheme (“Scheme”) was implemented aiming at the protection of the Primary Residency and the mitigation of the issue of non-performing loans (“NPLs”) in the Cypriot banking system. Its implementation is expected to have a positive impact on the resilience of Cyprus Banks by contributing to the deleverage of the NPLs of Cyprus Banks.
It is expected that the local and international real estate and construction market will see a drop in prices. Investors are already thinking twice before investing in foreign markets, local buyers are now limited due the crisis and the demand for Airbnb rentals has decreased, thus pushing towards lower rental values.
With movement and travel restrictions in place, the value of real estate has been suffering and, if not lifted soon, will continue to do so. Ultimately, it will all depend on when the restrictive measures are eased or lifted, with the new norm in place, and then again it will take time for the market to stand tall and return to any aspect of normality.
Cyprus for business and real estate
Cyprus has long been a fundamental, geostrategic location as the third largest island in the Mediterranean crossroads of Europe, Asia and Africa. Organisations ranging from private or family businesses, startups and multinationals have established headquarters in Cyprus.
As a member of the European Union since 2004 and the Eurozone in 2008, Cyprus enhanced its role as robust and reliable destination for key players in various industries and sectors. The professional services industry evolved to cater for businesses of local and international clients, in line with the risks of the Digital Age and the challenges of globalisation.
The Cyprus real estate and construction market will no doubt bounce back strong again and continue to be a strong element in the Cyprus economy. However, it is still too soon to speculate an accurate timeline of recovery given the existing uncertainty swift developments locally and internationally in response to the Covid-19 disease.
OUR REAL ESTATE PRACTICE GROUP
The Real Estate Practice Group of our firm advises buyers, sellers and developers of residential, commercial and industrial real estate.
We stand by our clients’ side every step of the way, from inception to completion of complex projects, throughout their lifecycle. We advise on domestic and cross-border dispute resolution, business structuring, estate protection, project development and transactional matters.
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Please find below an outline of the services offered by our Real Estate Practice Group.
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