By Antonis Loizou FRICS
Part of the foreign interest in Cyprus real estate comes from China, and buyers are mainly interested in visa acquisition (not so much for passports) at the lower end of the budget. They are after the minimum €300,000 residential units and by tradition they direct their interest towards Paphos. Having said this, Chinese companies have shown an interest in large scale investments and developments. In Larnaca two hotels are under development by a joint venture with Chinese investors, whereas another five-star hotel is under way in Sotira with Chinese involvement.
These developments by themselves are encouraging for the building industry, but long term though, hopefully the introduction of the Chinese market will project Cyprus to China to attract tourists. The island’s “clean air” is one of the major reasons for the Chinese to look for property investments, while the security and locals’ hospitality also play an important role for this market.
There are no clear indications on the number of units bought by Chinese in recent years (estimated to be around 500 units with a value of €1.5bil) but we expect market demand is anticipated to increase as the small Chinese community becomes more involved in local activities and become themselves promoters for our real estate and tourism. To this end the much awaited direct flights between Cyprus and China by Cobalt Airways will help.
Why the Chinese with such a diversity in their own country wish to visit and even reside in Cyprus is difficult to pinpoint. A Chinese client informed us that “we feel at home, people welcome us as part of the family, the limited crime and no racism, as well as the established community in Paphos, are some of the attractions”.
What one must be careful with is the Chinese visa agents who also operate as estate agents, supported regrettably by various local advocates. The average commission required by these agents is 20% on the sales price, a large amount, but it seems that so far they are getting away with it. Such high commissions are not illegal, but are they honest?
On one occasion a Chinese buyer bought an apartment in Larnaca for €300,000 with ordinary 5% commission included while a neighbor bought similar apartment for €230,000. They got together and the scam was realised and we hear that the case will lead to court.
This reminds us of the early years of the British market demand with such scams which for various reasons lead to the creation of the Property Action Group with all sorts of bad publicity. We hope that this experience will not be repeated in the future, but it is doubtful and we consider it inevitable. Increasing greed is a sickness in all countries and individuals but it seems Cyprus is a champion. We would have expected that the advocates who are supposed to advise the Chinese buyers accordingly and carry out a due diligence, would have advised the buyer, but, alas. No wonder in a recent property exhibition in China, some Chinese (presumably buyers) appear with placards objecting to Cyprus etc.
We were told of the following procedure (by a Chinese buyer):
“We were approached by a visa agent to buy a real estate in Cyprus during an exhibition. There were in addition to Cyprus, other countries offering free inspection trips but we opted for Cyprus, where we had to pay for the trip, but not the accommodation.
“For the three-day visit our programme was so full including lunches/dinners there was no chance to look around the wider area.
“We ended up on the third day to sign a sales contract at an advocate’s office where we taken by the developer, and the advocate added his own good comments on the purchase.
“After 3 months when we stayed at the apartment we bought, we were told by locals/neighbours about the non titles, the 20% commission etc.
“It was too late by then”.