Cyprus’ controversial citizenship-for-sale scheme will ultimately cause a drop in property prices and lead to stricter EU oversight for citizenship requirements, property experts have warned.
Two months after the notorious ‘haircut’ Eurogroup decisions of March 2013, the scrambling government rolled out a citizenship-for-investment programme, which aimed to ease the pain of wealthy foreign depositors who saw millions of their money converted into equity, and to bring in desperately needed cash in the short-term.
Almost four years on, the policy has proven so successful that the government has openly taken back its pledge that it would be a temporary measure to address immediate liquidity concerns. According to Interior Minister Socratis Hasikos the scheme had brought in close to €3.5 billion in foreign investment by the end of 2016.
The Cypriot passport ranks among the strongest in the world, allowing holders to travel to 146 countries without a visa, crucially including all European Union member states.
Originally, the programme offered Cypriot citizenship to foreigners who invested at least €5 million and bought a residence worth at least €500,000, but the rules were relaxed and the minimum requirement is now less than half – €2 million in investment in the property market or Cyprus-based companies, still including a residence worth at least €500,000.
But a clause in the scheme’s terms and conditions that allows investors to sell the house they bought after three years may spell trouble, valuer and property consultant Antonis Loizou thinks. The government policy has created a market, and the market sparked an industry. Large tower blocks are being built to cater specifically to the same people the government policy aims to attract, and they are selling out fast.
“What will happen after these three years if at least 50 per cent [of investors] place their units on the market at discounted prices?” Loizou wrote in an article last week headlined ‘Worries regarding overdoing it’.
In it, he argued that the government’s incentive is creating a distorted market, marked by oversupply in such high-end residences and purchases by people who don’t really want them and have no intention of using them, which, given the right (or wrong, as the case may be) circumstances, might crash.
“What will this cause to existing and even other projects being developed and the units that will be ready at the time?” he asked.
Loizou thinks the bubble which has been inflated over the last three years is likely to pop soon, as many of the first investors to take advantage of the scheme reach the three-year release clause for property ownership. A wave of high-end residence sales, he figures, will leave neither the broader housing market, nor the banks financing the construction of these projects, unaffected.
But Akis Kyradjis, vice-president at financial advisory Arton Capital, which consulted the government in its latest revision of the citizenship-by-investment rules told the Sunday Mail that such a scenario was highly unlikely to emerge.
“It is important to have in mind that the people in question are high net-worth individuals with multiple home ownerships,” he said.
“In the event that they decide to sell and the price offered to them is below what they paid or expect, they will simply not sell.”
A half-million investment is insignificant to these people, he noted, and the main reason they might decide to sell is if the price has in fact gone up.
However, a plateau in the prices of A-class beachfront properties – which make up the bulk of these purchases – can reasonably be expected, Kyradjis added.
“We expect prices to remain at their current levels in the short to medium term,” he said.
The assessment of economic risks notwithstanding, though, an even more worrying threat looms over the government’s golden-ticket policy. While several EU countries such as Malta, Spain and Greece have similar schemes in place, European institutions seem to have singled Cyprus out as the black sheep of the family.
Part of the problem is that Cyprus introduced the scheme on the promise that it was a temporary response to the island’s economic woes, a pledge the government has since flatly reneged on – and actually went the other way, further relaxing eligibility criteria.
This was acknowledged by Hasikos last December, when he angrily censured fraudulent online advertisers for promising foreign investors Cypriot citizenship for as little as €800,000, citing their relationship with the minister.
“We went through hell and back to keep the scheme alive, and we will keep it going,” he said.
Security concerns were also raised, citing the filtering of eligible individuals.
“Selling passports is unacceptable,” Estonian MEP Urmas Paet said last September.
“It’s not always clear if the applicants do not have a hidden agenda which may be risky from a security point of view.”
But objections voiced from the European parliament and the European Commission centred on the principle of ‘genuine link’, meaning foreigners should be rewarded for investing in a country if there is a demonstrable connection – business or personal. Cyprus’ rules allowed for a foreigner to qualify for naturalisation by buying a €2-million house while never even setting foot in Cyprus.
In response to a question from the European parliament in January 2015, the commission’s justice commissioner Vera Jourova said as much.
“The commission has stressed that it expects member states to use their prerogatives to award citizenship in a spirit of sincere cooperation with other member states and the EU,” she said.
“Criteria require in particular the existence of a genuine link between the applicant for naturalisation and the country or its people. Investor citizenship schemes providing for the possibility to obtain naturalisation in return for investment alone do not meet the minimum requirement of a genuine link to the country.”
Jourova said that it appeared that only Cyprus was granting naturalisation in return for investment alone, and the commission was “pursuing a dialogue with the Cypriot authorities on this issue”.
In response last September the Cyprus government introduced a requirement that investors are granted residency first, and then full citizenship – all through a ninety-day, fast-track process. The government argued that the three-month residency aspect satisfies the ‘genuine link’ criteria, and insisted that its vetting process is extremely detailed, involving not only domestic but international agencies.
Loizou believes the EU’s objections are likely to end up in additional requirements slapped onto Cyprus’ rules, but Kyradjis once more disagrees.
“Pressure from the EU is coming mainly as the result of competitors’ actions and less as the result of EU concerns,” he said.
“The European Commission translated the [European] parliament’s concerns into a requirement for the granting of citizenship to be preceded by residency which, they said, would create a ‘genuine link’.”
In Arton Capital’s opinion, he added, anyone who opts to risk more than two million of his money is doing so on the basis of a pretty strong link with the EU and the country.
According to Kyradjis, the granting of residency or citizenship in exchange for economic benefit to the hosting country has been a “time-honoured tradition” since the time of the Roman Empire.
“One will have to explain how millions of Indians, Pakistanis, Turks, Algerians etcetera, found their way into Western Europe,” he argued.
“The only difference now is that countries need investment capital, while in the 1950s and 60s they needed human capital.”
61 Comments
Wanderer
February 14, 2017 at 11:43“According to Interior Minister Socratis Hasikos the scheme had brought in close to €3.5 billion in foreign investment by the end of 2016” — He meant to say that it brought €3.5 billion to his developer cronies, at the same time making houses even less affordable for young Cypriots.
Andreas Louca
February 6, 2017 at 08:48The scheme citizen ship for investment is a disgrace to the Cypriot nation and is only there to enrich the elite of our society, its time we Cyprus took back prime in our country we have suffer too much from the elite who have destroyed us and rip us off at every opportunity the have got. The bankers are ripping g us off with their excess charges,the government are making our citizenship look cheap,and all the time the elite get richer at our expense
Bystander
February 6, 2017 at 00:43Mr. Loizou, undoubtedly known to many due to various reasons, is speaking his own (and fellow developers) interests only. And selling Cypriot citizenship should be just officially admitted and all ‘Cyprus is not for sale’ nonsense stopped.
plexor
February 5, 2017 at 21:38CY disqualifies itself more and more
In my opinion, CY sells with its Citizenship-for-investment programme EU-values and degrades thereby an EU-citizenship as buyable, all nearly exclusive on the expense of other EU-member states. The advantage for some privileged Cypriots (property-sellers, banks, lawyers, intermediaries and some more) is all the benefit, they make out of these investments (right now: 3.5 billions) plus possible bribes and for the CY government the advantages are all the taxes out of this benefit plus income for the citizenship procedure, less the printing costs of the passports.
Cypriot citizenship for as little as €800,000 of an investment into the property market, can be the praxis.
According MP Angelos Votsis, CY provides a „flexible tax environment to corporations“ (of foreigners). Why not having a flexible investment sum for giving a citizenship, for example depending on the height of the bribe? According to the self-adulation of Interior Minister Socratis Hasikos, the programme had brought in close to €3.5 billion in foreign investment by the end of 2016, what means up to approx.
2000 sold citizenships. In my mind, an investment sum of 3.5 billions in combination with a lots of bribery possibilities, is not possible in CY, without corruption.
The bribery possibilities: That bribe gets paid directly to the Interior Minister is improbable, but to deputies or higher officers of the Ministry, it seems possible or even probable in CY – think only to the scandals with bribes from construction companies around the Phaphos municipality. For example, for citizenship asking foreigners can be directed in the quiet from deputies and/or higher officers of the Ministry to certain architects/construction companies respectively property sellers, which pay for such privileged recommendations. Also banks are interested to be recommended, to give a loan for property buying and do unlawful foreigner-exploitation thereby. At the end, foreigners have to pay higher prices or even usurious prices, what would be a typical CY-fake. Property sellers and the authority, which gives the citizenship, can do conspiracy to push the property price and make the foreigner dependent, by selling property in combination with the citizenship.
A CY-minister, who censured advertisers for promising foreign investors Cypriot citizenship for as little as €800,000, citing their relationship with the minister, is not automatically honest – it can be a trick. One should investigate, whether Hasikos has friends and/or family members, who sold property to foreigners/citizenship buyers. Even if there are family members, who have property sellers or intermediaries as friends, one should investigate, whether these friends sold property to citizenship-buyers.
That the citizenship-for investment programme was „aimed to ease the pain of wealthy foreign depositors who saw millions of their money converted into equity“ was obviously a lie and a hypocrisy. No damaged foreigner got compensated and the programme does not distinguish between foreigners, who lost money and any others. Its seems to be more a ruthless money making with selling EU-values and maybe a big corruption and foreigner-exploitation programme for politicians, banks, authority officers …, with which disqualifies itself more and more. CY politicians seem to have absolutely no EU-spirit and only abuse of the EU-membership in the mind and of course tax stealing and other kinds of thieving, like stealing money from bank accounts or stealing via written-off loans …
Neroli
February 5, 2017 at 23:44‘…..is not possible in Cy without corruption ‘
No_Name12
February 5, 2017 at 17:09Meanwhile migrants living and working legally on the island for 10, 15 years, people who ave been living on the island since infancy and asylum seekers and recognized refugees from war-zones are refused citizenship by the immigration department.
peemdubya
February 5, 2017 at 21:47If they have residency then citizenship is a possibility, as long as they can grease some palms to the tune of many thousands of euro, and wait an eternity for completion – an absolute farce!!!!
Bystander
February 6, 2017 at 00:55‘Express processing’ of a perfectly legal citizenship acquisition case used to be 30-35K EUR just 5 years ago. I personally know of several cases with fiends or people I know. 3 cases involved children, who became adults by the time citizenship application was processed.
peemdubya
February 6, 2017 at 01:09OMG!! I had heard 7-10K being bandied around but 35K? Guess I’ll just stay as a resident and not apply for the citizenship passport, the Prez will just have to do without my vote.
Bystander
February 6, 2017 at 01:33I guess amounts depends on applicant’s nationality etc etc. What can be taken – is being taken. Island mentality.
Wanderer
February 14, 2017 at 11:58Even many of those who pay 30-35K EUR end up being scammed due to the ridiculous laws (set up by lawyers) which let lawyers to get away with anything. Basically, regardless of what they tell their clients, lawyers have little influence if any on citizenship application processing. They make up stories about relatives or other connections in government, collect tens of thousand of euros from gullible clients and pretty much do nothing. Some of their clients luck out an get their citizenship, some do not. Lawyers attribute those rare successes to themselves and use them as proof of their influence. Although the truth i that they have nothing to do with those successes in most cases. The latest scam is to offer guaranteed success without prepayment but upon a payment of €30K or so on success. They get clients to sign a contract which obliges the client to pay that amount on success. Then they do nothing. Some clients get their application approved anyway and now regardless of the fact that the lawyer had nothing to do with it, they end up with a bill to pay. Even without such a contract the law strongly protects lawyers’ fees, they can basically demand from clients any amount they want and the client must pay. And you can’t switch lawyers, the law prohibits other lawyers from taking over your case until you satisfy whatever demands the first lawyer deems reasonable.
Bystander
February 16, 2017 at 01:26They do, indeed. many are waiting for well over 15 years, keep paying to their lawyers some 3-4K per year for ‘actions’ and ‘pushing’.
Bystander
February 6, 2017 at 00:51But that’s perfectly fine within local mentality. Let’s start with tourists: they were always graded as ‘quality’ and ‘others’. Same goes with those who are trying to acquire citizenship. Wealthy candidates are ‘quality’ or ‘first grade’, others are ‘junk’. Nothing wrong here. I have been reading few articles on ‘island mentality’ (which includes ripping off whoever passes by, as they were unlikely to visit again) – this has been the case for several centuries at least.
disqus_wSKR3wXkMR
February 5, 2017 at 14:21The Cyprus Government will come to regret their actions as there is no incentive / obligation on those who have bought their Cypriot Passport / Residency to actual live here and spend money in the community.
Local businesses will not benefit as the owners of the houses need not be here and therefore the houses will remain unoccupied. All the developers are doing is building future slums.
peemdubya
February 5, 2017 at 21:50Our street (oops, sorry, development) is just that – nearly 50% owned by Chinese and at least 50% of those owned by non-occupying Chinese (ie empty, not even let out). Gardens a tip, pools either unfinished or left untended, wall coatings peeling – bloody annoying!!!
Neroli
February 5, 2017 at 23:40Sad isn’t it when you can’t choose your neighbours
peemdubya
February 5, 2017 at 23:50There was an old saying – you can’t pick your relatives nor your neighbours, but you can always pick your nose……….just thought I would share that with you……….lol!!!
Neroli
February 5, 2017 at 23:54So kind of you!
peemdubya
February 6, 2017 at 00:00No problem, after all it is Share-a-thought-with-a-friend-Sunday in Cyprus, didn’t you know?
Neroli
February 6, 2017 at 00:27Wasn’t in my diary!?
peemdubya
February 6, 2017 at 00:35Aah, dodgy diary! Must be the same one that someone on Facebook had, from which they reckoned pancake day was next Thursday! Trying to persuade my wife that Shrove Tuesday only happened on a TUESDAY, as opposed to the Laws of Facebook, and was also at the end of this month, met with some initial resistance………….LOL!!!!
Neroli
February 5, 2017 at 23:39Future slums? Some are already!
plexor
February 5, 2017 at 14:15Estonian MEP Urmas Paet: “Selling passports is unacceptable”
This is also my meaning, as CY sells with such passports EU-values and tries with it to live again on the expense of others, like they do with the tax stealing. Thereby CY sells companies respectively post
boxes, which have then free access to the EU-market and steals in addition corporation tax, which normally belongs to other countries. MP Votsis spoke a few days ago from “catastrophic consequences
for the CY economy”, if CY would have to share such taxes with other EU-members. This was an indirect admission, that CY still does tax stealing.
Selling passports is of course also suitable for corruption. Therefore, one should also have a close look or do an investigation, if the done total investments have been really 5 mio., respectively now 2 mio. and not faked. Maybe some online advertisers, promising foreign investors Cypriot citizenship for as little as €800,000, citing their relationship with the minister, aren`t so wrong. It can be sufficient, that the advertisers did a little imposture and have only close relationships to deputies at the ministry. It should be allowed to have doubts, because there were a lots of bribery scandals in CY, reaching also ministers. One was sentenced to 15 years.
The question is also, how the rest of the investment – except the buying of a residence – is done. If done by the registration of a CY company, respectively a post box company, via which CY steals
corporation tax, it is in my opinion clearly fraudulent or lets say double-fraudulent. And buying a residence, does not mean, that the owner lives in. This should also be investigated.
Costas Apacket
February 5, 2017 at 13:32Thank God that the UK are leaving the EU with the Beverly Hillbillies in charge of the southern flank.
EruDite
February 5, 2017 at 12:54Can a Turk from Turkey buy citizenship if they provided the funds?
braveheart
February 5, 2017 at 13:17That’s a good one!
Frustrated
February 5, 2017 at 13:36I don’t see why not so kick off a gravy train of Anatolians by going south, buying an overpriced concrete box and joining the club!
EruDite
February 5, 2017 at 14:34Isn’t it true that GCs are “dissuaded” in no uncertain terms not to sell to TCs or Turks?
Frustrated
February 5, 2017 at 14:43That might be the case but flash a sufficient amount of spondoolies and any prejudice against what they deem to be your ‘barbarism’ will instantly disappear!
Veritas
February 5, 2017 at 15:58If they pay enough, nothing is impossible.
No_Name12
February 5, 2017 at 17:11Turkish Cypriots are already (supposedly) guaranteed citizenship. They are definitely entitled to a Cypriot passport, which many of them have acquired after the opening of the checkpoints. I dont know what the situation is with Turkish nationals. I know it can get awfully complicated for a Turkish national to visit the south legally. Part of the whole Turkey not recognizing Cyprus, so there are no official international relations and no embassies, and of course the whole problem of acquiring visa etc etc. I heard the Greek embassy mediates such requests.
Weird world, I know.
Neroli
February 5, 2017 at 23:37They would sell their own yiayia if the money was right!
Neroli
February 5, 2017 at 23:36I’m sure!
Bystander
February 6, 2017 at 01:04why not?
Disgruntled
February 5, 2017 at 12:20Meanwhile those who genuinely wish to live, work and make their lives in Cyprus have to wait ten years or more for a Cypriot passport. Disgraceful double standards yet again.
Bystander
February 6, 2017 at 01:07there is an excellent investigation report on this matter. Made back in 2008, if I am not mistaken, but describes things as they are today, almost nothing changed.
disqus_ZPlOdQqScB
February 5, 2017 at 11:28They should be a clause of living here for a least 3 months per year! That would kill this once and for all.
Veritas
February 5, 2017 at 11:47Make it 6 months.
Slomi
February 5, 2017 at 11:54as well as a background check of activities for the time when the “citizen” was out. I am not excluding here any vetting, background checks and investigations of records in Interpole etc at the time of application of citizenship.
Caulkhead
February 5, 2017 at 12:25But they don’t want to kill it! In the short term they are quite happy for Cyprus to be a repository for dirty money and tax evasion. How else are they going to fund the status quo?
Neroli
February 5, 2017 at 23:35Not long enough!
Disruptive
February 5, 2017 at 11:05It’s not citizenship-for-sale program, it’s money laundering with bonus passport program.
JSReturnsAgain
February 5, 2017 at 10:44Short termism in a nutshell. Visited Latchi in the North West over Christmas. Almost all the big beach fronts are owned by Chinese or Russians who never use them. They either cleaned black money or bought passports. The local economy gets zip and the developers spirit away the capital and don’t pay their debts. Also, lets remember our MP’s (who voted to support this part of the MoU) made huge amounts of money as lawyers facilitating the movement of the dodgy funds and people into Cyprus. Business 101 Cyprus style: screw everyone, screw the country and eventually screw yourself!
Neroli
February 5, 2017 at 10:30Many of those high end beach front properties are empty, like many where I live (mine isn’t highend! ) they are bought then more or less abandoned, they don’t want to live in Cyprus just a cheap way for them to get to Europe
Slomi
February 5, 2017 at 11:09Exactly and who knows the source of this income?
Bystander
February 6, 2017 at 01:11there is virtually no legitimate income amounting to six-digit figures, with very few rare exceptions.
peemdubya
February 5, 2017 at 22:00And a cheap way of shifting the dirty money……………………
Neroli
February 5, 2017 at 23:18They could pass it to me, I don’t mind what sort it is!!
braveheart
February 5, 2017 at 10:26It shows the duplicity of the Greek Cypriot government. Selling passports to far away Asians while condemning the TRNC for extending free citizenship to next of kin from 50 miles across. The usual double standards, no surprise!
Bluestorm
February 5, 2017 at 14:19You are an unrecognised pirate malignant growth.
Bluestorm
February 5, 2017 at 14:21What an unbelievable comment.
braveheart
February 5, 2017 at 14:34See your doctor!
Bluestorm
February 5, 2017 at 22:05Après vous monsieur.
Slomi
February 5, 2017 at 10:11The addendum in the Law pertaining to citizenship conditions and allowing foreigners of non-eu countries to get a citizenship on the basis of property/investment volume in Cyprus is just an abuse of management powers by the government. A strong probability lies that mafias leaders and people with black cash have already entered in Cyprus, enjoying citizenship and now heading towards other EU places . A bad decision and against the spirit of EU.
Veritas
February 5, 2017 at 10:38As we know to well Slomi, in Cyprus there is a price for everything. Mammon is the God to follow.
We sell our land to anyone, as long as the price is right but without any concerns who they are or from where the money originates
It’s appalling that we don’t have stronger sentiments for our land. It’s only when we want to ‘score’ some international points by accusing Turkey for abusing ‘the sacred land of our ancestors*.
Slomi
February 5, 2017 at 11:08I exceptionally liked your observation in your second paragraph.
While we share our own country land with a foreigner, we should not give away this land to some unknown persons. There should be some tough vetting system.Otherwise,it is awfully convenient for any person earning an easy money to buy some expensive villas here in Cyprus and to initiate his /her operations from this place to all EU countries. This island is causing dangerous threat to all the continent by allowing a settlement to these rich people without any security and character clearance from their own countries as well as vetting through investigations through Interpol etc records .
Mr. Poopybutthole
February 5, 2017 at 09:51The most stupid decision is to exchange citizenship for money. This means opening gates for all kinds of mafia, Russian semi-criminal oligarchs, pimps and other lowlife scum who own loads of bucks.
Neroli
February 5, 2017 at 10:27A lot of those here!
JSReturnsAgain
February 5, 2017 at 10:46Didn’t we have a lot of these types before the cash for citizenship ? the home grown variety, particularly found in the corridors of power
almostbroke
February 5, 2017 at 18:20Yes J S – lawyer firms became mega rich ‘facilitating ‘ all kinds of despots and other dubious people and some are lurking around the parliament ! Money is God in Cyprus !