The strong increase in property transactions reported on Monday by the department of lands and surveys is the result of tax breaks offered to buyers as well as special incentives to foreign purchasers while a number of other factors related to recent changes in the legislation affecting property may have also helped real estate, professionals said.
According to the department, the number of real properties which changed hands in February rose an annual 54 per cent to 501, the third highest since July 2012, boosted by transactions in the Limassol district, which almost doubled.
In the second month of 2016, property transactions in Limassol rose 85 per cent to 179 compared to the respective month of 2015, the department said. In Nicosia, the number of transactions rose 76 per cent to 79 while in Larnaca, Paphos and Famagusta the figures rose 52 per cent to 108, 18 per cent to 100 and 30 per cent to 35 respectively.
In the first two months of 2016, the number of reported property transactions rose 28 per cent to 828 island-wide, the land department said. The number of properties that changed hands rose the most in Nicosia to a total of 133, 46 per cent higher compared to the respective period of 2015. Limassol and Famagusta followed with a 41 per cent annual increase to 271 and 33 per cent to 57 respectively.
Larnaca and Paphos reported the smallest annual increase in January to February with 16 per cent and 14 per cent to 186 and 181 respectively, the department said.
While there is not absolute certainty over what the exact reasons behind the increase in real estate transactions, property market professionals agree that tax breaks property buyers in the form of a 50 per cent discount on transaction fees and a permanent exemption from capital gains tax for properties purchased in 2015 and 2016, combined with incentives to foreign buyers in the form of a permanent resident permit or Cypriot citizenship, have helped increase demand, two property market professionals said.
Kyriakos Talatinis who chairs the Cyprus Association of Valuers and Property Consultants said that the increase in property transactions may reflect “contracts signed in previous months” which were submitted to authorities this year.
While “investor interest remains stable, likely higher compared to 2015,” there are currently not sufficient data available to explain what caused the increase in first two months of the year, he said in a telephone interview.
Charalambos Petrides, chairman of the state-owned Cyprus Land Development Corporation, and manager of the Landtourist Valuation, a unit of the property consultant group Landtourist Agency Ltd, said that the property market is showing first tentative signs of a stabilisation and recovery, reflected also in a slowdown in property price drop.
“It now clearly seems that after a property price drop that lasted six years, lower prices are now attracting buyers,” he said in a telephone interview. “We are also witnessing an increase in the sales of real estate property under construction which became very rare during the crisis and this is a good sign”.
“We have also indications that homes, small houses and apartments, are being now built at some prime locations,” Petrides said. “Last year’s economic growth, which is expected to continue this year, was helpful for the construction sector. The increase however we saw in building permits may not necessarily translate into actual construction projects and may also reflect the 20 per cent additional construction coefficient offered by the government”.
Property evaluator Talatinis did not rule out that the implementation of the law which allows the issue of title deeds to buyers of property from insolvent developers as well as tax breaks and bank restructurings may have contributed to the increase in transactions which he expects to help property prices stabilise.
“In 2016, there will be a stabilisation of property prices in general but the property market will be market of many speeds,” Talatinis said. “Some properties, especially at the coast or near the coast may gain in value, while other properties, such as farmland, is likely to remain under pressure,” he said. “Prices of one or two bedroom flats are also likely to see their value increase,” he said.
Limassol, partly because of the privatisation of the commercial operations of the town’s port, may also see demand for real property rise further, he said adding that demand for commercial properties in Nicosia will remain low with the exception of “high standard offices” that will remain “satisfactory”.
“We may also see some pressure on some less commercial properties in Nicosia,” he said.
Talatinis added that the decision of the Larnaca municipal council to evict hydrocarbon companies from the town’s port may force them to relocate their office headquarters from Larnaca to either Nicosia “where all the ministries are” or Limassol.
Petrides, the chairman of the Cyprus Land Development Corporation, did not rule out that developments in the banking sector also played a role in the recovery of the property market as banks increasingly resort to debt-to-asset swaps in their attempt to help borrowers repay their loans.
“We should not ignore that loan restructurings and loan to asset swaps are also playing a role in the real estate market, even though we don’t have any indication yet of their extent,” Petrides said. “What is likely to have had an impact on the market is that banks have not proceeded to mass foreclosures, some were expecting, and as banks appear to go ahead with a reasonable management of the acquired real property, this tactic is going to yield making real estate an option for investors”.
Banks, Petrides continued, will have to find ways to deal with the properties they will continue to accumulate over “the next three to four years” so that they will both manage them effectively as well as the maximise their value.
Petrides also said that the continued uncertainty over the outcome of reunification talks is unknown whether it impacts the property market. “We don’t know whether it will be solved, when and how,” he said.