By Antonis Loizou FRICS
OVER the last year a number of skyscrapers have appeared on the Cyprus horizon and they seem quite impressive. The fast rate of sale, in most cases in cash, is encouraging others to follow. As an estimate there are on the market and in the pipeline approximately 1,000 units (all over Cyprus). The vast majority of these buildings are in Limassol, but two more are underway in Nicosia (and one pending) as well as one in Paphos and one in Larnaca.
These buildings, impressive in appearance as they may be, offer top luxury accommodation all with modern conveniences and including common facilities such as internal pool, restaurants/cafés, ample parking and 24 hours concierge service etc etc.
So far so good but who will manage these buildings in terms of the maintenance, administration, the collection of common expenses (which we estimate as an average €1,000-€1,500 per month per apartment) under a common expenses law which cannot be implemented. For this type of property, the situation will get worse as the buyers will tend to be foreign who most likely will not live in them.
But is there enough demand to absorb the 1,000 units plus another 500 or so that will come into the market over the next couple of years?
High end foreign buyers also have alternatives such as the Larnaca/Paphos marinas (still on the drawing board), the golf courses (huge supply) and other type of properties.The plight of others has helped us attract these buyers so far, and the Passports/Visas scheme has helped in addition to our taxation system. But will this huge supply generate enough demand over the next three to five years for all these units to be absorbed? There are factors that need to be considered:
- The passport measure is now under revision and although it is will not stop it will be more difficult to secure passports/ visas, with loads of information required from the buyers and with an overseeing committee.
- The tax situation (as with the passport issue) is under scrutiny by the EU and if our advantageous tax system is harmonised with the remaining EU countries (as is the EU goal) we stand to lose another part of our attractiveness.
- The Russian government is taking all sorts of measures to attract repatriation of Russian capital and although we expect that it will not succeed (due to its political situation) to an extent, it might attract the interest of some large investors.
As a result of the above danger, a recent announcement by the planning department, be it at its initial stage, that such future high rise development is a policy to be reconsidered is a warning (although it may cause a rush of applications by others to climb on the bandwagon).
Prices for such residential units range from €5,000/m² to €15,000/m² with the lower end being in Nicosia. Are the investments however going to be sustainable in terms of value and rental income? If a two-bedroom apartment has a sales price of €1m who is going to pay the rent of say €3,000pm plus common expenses? At the moment land owners, accountants and advocates who deal with this sector are having a good time but how long will it last? Care is needed.