By Costas Apostolides
THE question of what will happen to land prices after a Cyprus settlement is often posed indirectly, with people assuming that land prices will equalise with the removal of the Green Line, and then staring at you for confirmation of this generally accepted fact. How prices will behave is not clear, and it will be a long time before a stable market can be established.
Fear that land prices would fall was a significant factor in the rejection of the Annan Plan by the Greek Cypriots in 2004, because in most cases the wealth of the people was and continues to be in land ownership.
To consider the question of how prices will behave we have to get back to basics. First there has to be one market for land, with no impediments to buying and selling for the citizens of Cyprus and for foreign investors. Mustafa Akinci’s recent statement that Greek and Turkish Cypriots will be able to live and work wherever they wish, though they may not have voting rights at the place of their abode, is an encouraging change in Turkish Cypriot policy on the four freedoms, of movement, employment, settlement, and business. But this in itself does not create one land market.
First there are the great demographic changes that will take place after a settlement. If there is an agreement on territorial adjustment, then 50 per cent of the Greek Cypriot displaced will be able (if they wish) to go back to their homes and property. If property is unutilised that part is relatively easy (except for the matter of mortgages undertaken by the users), but since most of the houses and property are occupied, restitution can only take place if the Turkish Cypriots and settlers living there are assisted to move into the Turkish Cypriot administered province. That in itself is complex because the Turkish army has to leave the area of territorial adjustment, before the demographic changes can take place. In 2004 the Turkish government stated that they needed three to four years to move the troops from the area under territorial adjustment.
Therefore the priority is to resettle the affected Turkish Cypriots in the northern province of Cyprus, or in the villages they left in 1974 and 1975, according to their wishes. But the Turkish Cypriot properties in the south are occupied largely by Greek Cypriot displaced, or have been destroyed by the weather, natural decay, vandals, or negligent management. Therefore the resettlement of both Greek Cypriots and Turkish Cypriots needs good planning, sequencing, and funding. That should be the priority.
In 2004 it was estimated that about 50,000 Turkish Cypriots or settlers have to be resettled owing to territorial adjustment. How long would it take to accomplish that in a reasonable manner that protects human rights, and in general brings about an improvement in living conditions? Until the even-larger resettlement of Greek Cypriot displaced is accomplished, property prices cannot be equalised. There will be too many demographic changes taking place all at the same time.
Prices will, however, also be affected by what will happen to the economy in this initial period of the new constitution. A 2012 study using input – output methods, found that on the big assumption that all this resettlement can be funded, the economy will grow rapidly, unemployment will fall, and the benefits will be evident in all sectors and for most of the population. This will help stabilise prices and set the basis for property prices to begin to equalise. The question is how this could be funded?
In some areas private investment will bring rapid development and influence property positively. The redevelopment of the Famagusta ghost town of Varosha will boost the whole region, again affecting land prices. In 2004 there was a fear that this would reduce land prices in Protaras, Paralimni, Dherynia and Ayia Napa. In fact the opposite would happen. The rejuvenation of Famagusta would spur development of the whole region, and make Ayia Napa and Protaras an extension of Kennedy Avenue, and a year round tourist destination. The whole region would become more attractive for visitors to the benefit of Greek and Turkish Cypriots.
Economic management in the northern Turkish Cypriot province will improve, and economic development will boost incomes and the revenues of the province. Foreign investment will be encouraged, but care is needed to ensure that the beauty of the region is maintained. The casino-based tourism with Turkish citizens, and an average length of stay of only four days for tourists, will be reduced in importance by much greater European tourism, bring it on a par with the south. This again will be reflected in higher incomes and an increase in property values. In many areas there will be massive gains on Turkish Cypriot land in both the north and the south, again bringing equalisation of property prices.
When could we expect one property market in Cyprus? All going well, soon after the main demographic changes have been made and people resettled. In terms of time that could be done within seven years, assuming the property ownership issues are concurrently resolved.
Will there be areas where property prices will fall? Yes in areas where the displaced may not return because they have spent 42 years living elsewhere on the island. But even in such cases the general improvement in the economy should stabilise prices. Paphos and Ayia Napa should be able to withstand the competition and exploit their advantages, Limassol is developing rapidly and will continue to be the key business centre, and Larnaca should be well placed in the middle of everything to develop, as long as local government there stops making bad decisions. The removal of the petrol storage tanks opens up new possibilities for tourism, and should increase its competiveness.
Kyrenia will benefit considerably, because of its natural beauty, the Karpas should be carefully developed owning to its natural advantages, and should be transformed by high-class tourism initiatives. While Nicosia will be the centre of three governments, which should be enough to ensure the welfare of the people.
The above assumes that we all learn from the mistakes of the past, and try to cooperate and work together for the benefit of all the population. We need to make the new Federal constitution workable, and moderate our demands to ensure the Federal Republic of Cyprus is a success and benefits all the people. If we disagree and create discord, we all lose.
Costas Apostolides is an economist, Lecturer at Malta University, and founder member of Pax Cypria Cyprus Institute for Peace.