Grow­ing in­ter­est from for­eign in­vestors

Financial Mirror (Cyprus) - - FRONT PAGE -

There ap­pears to be some sort of in­creas­ing in­ter­est for Cyprus al­ter­na­tive in­vest­ments. Real es­tate de­mand from wealthy buy­ers is ac­tive, rang­ing from the ac­qui­si­tion of top qual­ity houses, to of­fice build­ings (as an in­vest­ment – for in­come) etc.

Other in­vestors (mainly for­eign) are look­ing around the is­land for other types of in­vest­ments such as ho­tels, whose pref­er­ence is at the top and with a rather pos­i­tive fu­ture, since the tourist in­dus­try is im­prov­ing. This de­mand is ex­pected to be­come more ev­i­dent dur­ing 2017/2018 with ho­tel in­vest­ments show­ing a re­turn of around 10% on the cost/value. At the same time, ho­tel own­ers are will­ing to sell their prop­erty and lease it back for a pe­riod of 10-15 years with a “guar­an­teed” in­come of 6-8% on av­er­age. If the ho­tel is of a good qual­ity and bear­ing in mind the ex­pected in­crease in value in the fu­ture and de­pend­ing on the deal, this is not a bad re­turn con­sid­er­ing that de­posits abroad are around 1% p.a. and it is money de­posits which, who knows when and if they will have a “hair­cut” like Cyprus ex­pe­ri­enced (see pos­si­bil­ity in Italy). We even have an en­quiry for a sea fish farm and an­other for a multi func­tion restau­rant (i.e. 6 restau­rants in one build­ing) – both com­ing from abroad – whereas de­mand for ac­tive agri­cul­tural land is thin, but com­ing into the mar­ket more ev­i­dently and de­mand com­ing from far-away places such as South Africa and New Zealand.

All these and other en­quiries com­ing from abroad (and not only Rus­sians/ Ukraini­ans, but from other Euro­pean and U.S. cities) show at least some kind of in­ter­est in the econ­omy of the is­land, which, in turn will help the real es­tate mar­ket.

The for­eign de­mand nowa­days in­cludes other na­tion­al­i­ties such as Chi­nese (see ho­tel de­vel­op­ments), Is­raelis (see re­cent ac­qui­si­tion of three ho­tels), Le­banese (ho­tels and res­i­den­tial blocks), whereas we heard of an Afghan in­vestor who bought more than 50% shares of a pri­vate school/col­lege. To all these, added hopes are placed on the casino de­vel­op­ment, since it might place the is­land in an­other level of in­ter­na­tional play­ers (as the Li­mas­sol Ma­rina has done), whereas the re­cent Ayia Napa Ma­rina is show­ing a new source of de­mand (Arab na­tion­als) who show their pres­ence in the lo­cal Ayia Napa fish­ing har­bour.

We must not get too en­thu­si­as­tic and car­ried away with all real es­tate projects, since some of these such a golf cour­ses, have not shown the re­sults and the de­mand that were ex­pected and one won­ders what are we go­ing to do with the six new golf cour­ses be­ing planned and some ready for de­vel­op­ment. For­eign in­vestors in par­tic­u­lar do not nec­es­sar­ily ig­nore the Cyprus po­lit­i­cal prob­lem ei­ther, with the “com­pe­ti­tion” from the oc­cu­pied ar­eas, whereas the strike at Hel­lenic Bank and the prob­lems cre­ated by unions are all the worst put­ting off in­ter­est in that sec­tor.

The fu­ture of real es­tate and the econ­omy ap­pears to be pos­i­tive, but we live in a re­gion that has its own prob­lems which must be taken into ac­count.

The fu­ture of the real es­tate is not 100% cer­tain, how­ever. On the one hand we have these sort of pos­i­tive signs and in­ter­est for top-end, high-cost in­vest­ment prop­er­ties and on the other hand we read re­ports for the pend­ing sale of 6,000 units in forced sale pro­ce­dures (which is bound to push down/re­duce prices, but then – who is to buy these 6,000 units with no avail­able de­mand?). I would also re­peat past warn­ings that the pass­ports and visa schemes, which formed the ba­sis of the real es­tate re­vival, is not ex­pected to re­main as is after the E.U. warn­ings, whereas the VAT of 19% on build­ing land is an­other fac­tor to be con­sid­ered.

The banks in or­der to re­duce their NPLs have ap­pointed in­ter­na­tional re­cov­ery and man­age­ment firms in an ef­fort to dis­pose of the prop­er­ties in their books and their ef­forts will also have a neg­a­tive ef­fect on lo­cal real es­tate, be it a pos­i­tive one, if suc­cess­ful for the banks’ bal­ance sheet. So, we are cu­ri­ous to see how this sit­u­a­tion will de­velop over the next cou­ple of years. Other Euro­pean coun­tries are suf­fer­ing, but no one had the peo­ple’s de­posits be­ing con­fis­cated and at the same time the peo­ple los­ing their jobs with an un­cer­tain fu­ture. Surely, this odd sit­u­a­tion will be a sub­ject of fu­ture schol­ars to study and re­port on and how if we man­age to over­come it.

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