Growing interest from foreign investors
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.