By Yiannis Misirlis
I have great interest in the views of esteemed economists like Mr Pissarides. Thus, I read his views on the Cyprus property market with great attention (Sunday Mail, January 13). I take the courage to say that this time he might have got it wrong. He says that “the property market is growing out of sync with fundamentals…”
There is no doubt that the housing market in our country was severely affected by the global financial crisis and our own banking debt crisis. The combination of depressed sales and excessive supply accumulation led to a sharp fall in property prices between 2008-2015. However, the real estate market is cyclical and is currently at the recovery stage, where growing demand is slowly absorbing the existing supply. Gradually this will lead to stabilisation, and property prices shall continue to increase at the recent slow pace. Eventually, the market will reach its long-term occupancy average, where growth is equal to inflation, and the market moves to the next phase. Cyprus’ sales activity rose greatly at around 29 per cent from 2015-2016 and around 20 per cent from 2016-2017. In fact, in 2018, this rate dropped to a healthy 6 per cent, indicating that the market will stabilise further in the coming years until it reaches equilibrium, that is healthy year-on-year levels.
So, looking at the last five to six years, the statement that the property market is out of sync with fundamentals is wrong. An assessment of a much shorter period (say, last six or 12 months) is not indicative and can lead to all sorts of false conclusions.
Mr Pissarides went a step further by mentioning that “the bubble”, as he referred to it, “will burst instantly if the CIP [citizenship-by-investment programme] scheme stops”. This statement is totally unfounded and I can only think that it is more likely to be based on market rumours rather than on solid economical and statistical data.
There is no doubt that the CIP scheme has had an impact on market growth and will continue to do so; but the key factor is, to what extent the market is dependent on this scheme. According to the latest KPMG report on Cyprus Real Estate Insights (issued earlier this month), in 2018 the number of transactions related to high-end residential properties sold for over €1m amounted to just over 500, while the total number of property transactions nationwide for the same period was 9,242. This indicates that high-end residential developments – a property type which is often linked directly to the CIP scheme – account for only 5.5 per cent of the total overall.
Moreover, historical data (1999-2006) shows that Cyprus has always had a strong overseas market, which until 2013 was totally unrelated to any sort of CIP scheme whatsoever. Furthermore, the stable number of CIP applications (around 500 each year) and the number of transactions of high-end residential properties (also around 500 each year) indicate that these are not directly proportional to the increasing number of property transactions in the country, which have exceeded 9,000 this year.
Yiannis Misirlis is the founding director of the Imperio Group. He currently serves as the deputy chairman of the Cyprus Land and Building Developers Association (LBDA), and is a member of the board of the Cyprus Chamber of Commerce and Industry (CCCI) and chairman of the Real Estate Committee of CCCI