By Antonis Loizou FRICS
AS TIME passes so the pressure on Cyprus from the EU increases. At this point the visa/passports scheme is working well for us and has contributed to the expansion of the economy by 4% this year, whereas the net income from these sales of around ½bil is a sizeable amount.
Although based on government reports those who have secured Cyprus passports are around 1,700 but when adding up the family members and those for visas the number escalates. On the other hand, the Cyprus population is not increasing fast enough, raising future problems as the population is ages and lives longer. The population stagnation does not help the real estate market and this is one of the reasons for oversupply among certain types of property. The foreign demand is here however taking up the top end real estate and holiday homes at the lower end. Foreign demand in terms of number of sales amounts to around 26% of total sales (in 2016) and 25% (2017). In terms of value however the percentage is much more.
This is a substantial percentage which keeps the market going but is it a healthy state of affairs to be so dependent on foreign demand? Cyprus is not alone in this ageing population danger and most European countries have a similar problem. It is also a fact that most foreign buyers do not intend to stay in Cyprus for ever. With reference to the passports which require the retention of real estate for three years only (save the permanent residence), we expect that after this three-year period, a large percentage of the foreign buyers will be selling their real estate and at prices well below what they paid. From the announcement date of the measure, the first lot of buyers are nearing the three-year time limit. In addition to this supply there are new projects under design and those that are under construction will create a new worrying state of affairs.
A recent survey in Limassol shows around 400 new apartment units at the planning stage, which will come on to the market over the next one to two years. In addition to the over supply, developers who do not manage to sell their units over the next couple of years, might find themselves in difficulty to complete the projects as promised. The banks, at this point of time, do not seem to be particularly worried since most high end buyers are cash payers and thus the developers require little or no finance.
This foreign demand boom has helped various developers to survive, the banks to get their loans repaid, whereas deposits and business ventures has helped new business and the wider economy. It will be interesting to examine the effects that the new Chinese restrictions of taking money out of China will have in Cyprus and it will indicate the sensitivity of the local market to foreign demand.
The situation is very sensitive and little Cyprus cannot say no to new demands by the big countries requirements. In every sense we will not be liked by the majority of the beneficiaries of this boom but to ignore it will be hiding our head in the sand not following the events that are coming.