Is Limassol a sky-rise bubble?

Cyprus, and Limassol in particular, seems to be divided between two basic principles – to allow a new construction boom, with 30-storey sky-high towers, contributing significantly to the local economies in the short term, or to introduce a sustainable growth plan that will see tremendous benefits in the medium- to long-term.

Thus, the southern coastal port town is fast adopting the image of a split-personality city, where sacrifices are made in desperation, not realising the after-effects to the area that could impact future generations.

With Presidential elections just around the corner, development projects have been approved at an insane pace, with the government and all political parties hailing the nine mega projects underway or in the pipeline. These, they say, will create jobs and re-inject money into the local economy, thanks to foreign investors.

But a report in titled “The bubble of towers”, suggested that the uncontrolled vertical development is causing headaches to town planners, warning that the town could pay the price of uncontrolled development, referring to the rapid development created from when Famagusta was lost in the 1974 invasion and refugees re-established themselves in Limassol.

Panos Danos, CEO of the Danos BNPRE Group, said that “the Limassol property market is undergoing a strong surge, with high demand for prestige residential and commercial property – which will inevitably lead to a shortage of highvalue homes and offices. Several tower developments are currently in the development pipe line or in the conception stage.”

Danos explained that Cyprus has a small commercial real estate market, both in terms of occupier and investor demand. “Transaction volume is limited to acquiring units for own use, with few exemptions of local institutional or overseas investors, typically high-net-worth individuals, interested in income-producing assets.”

Based on Danos/BNP Paribas Real Estate research, it is anticipated that the demand for office space in Limassol is 20,000 sq.m. per year.

However, some sane voices have suggested slowing down the pace of development and looking at a sustainable model, that will have more value in the longer term. While others, including the environmentalists, are just as concerned about the damage caused to the soil, with pollution seeping into the sea, eventually making it unsuitable for swimming, warning that the absence of a wider national plan on development could backfire.

“Incentives provided for high-rise buildings are certainly a positive boost to the city’s real estate sector, however these need to be incorporated into the general regional plan,” said Costas Zeniou, Director of Delfi Partners and Company, a leading real estate and asset management company.

He told the Financial Mirror a more strategic master plan is needed, with special development zones, where such developments are encouraged and will certainly benefit the entire region.

“In addition, such incentives must also provide benefits to the rest of the economy and infrastructure. Naturalisation incentives have unquestionably been highly beneficial to the entire island’s economy, however, we must ensure these benefits have a sustainable, long-term effect.

“Unregulated over-development aiming to take advantage of short-term foreign demand due to naturalisation incentives can have detrimental impact to the real economy of the entire island, exacerbating the current volatile state of the financial sector. Therefore, as in any investment or incentive aiming to aid the economy, the criteria for approving projects should also take into account positive social and economic externalities and aim to maximise their long-term impact on the real economy.”

Another sane voice calling for a sustainable plan, is Nigel Howarth, editor of cyprus-property-buyers.com, providers of independent information and advice for Cyprus home buyers and property investors.

“The construction of the high-rise tower blocks in Limassol will provide a much needed boost for the island’s economy and construction sector, providing jobs and increased business for companies supplying the building industry.”

However, Howarth said that “on the building work will cause severe problems downside, the for those living nearby due to noise, roadworks and traffic congestion, in addition to improvements to public infrastructure such as electricity, water and drainage services to cater for the increased demand – and many will lose their sea view.”

“Are they going to enhance Limassol and make it a more attractive town? No consideration seems to have been given to the overall aesthetic appeal of the Limassol sea front and I envisage it will end up looking like a set of very bad teeth all of different heights with no attempt made to blend the highrise towers with their neighbours.”

“Who is going to buy all the new apartments, foreigner investors?” asked Howarth.

“The ‘Golden Visa Programme’ (aka passports for cash) is already under scrutiny by the European Union and it seems unlikely that it will allow Cyprus to continue the programme indefinitely. Furthermore as visa holders do not have to reside in Cyprus permanently, it’s likely that many of these