By Antonis Loizou FRICS
The coronavirus has produced many negative effects on the Cyprus economy and by projection to the real estate market. The precautionary measures taken by the government to reduce the effects of the virus also hope to protect also the economy, which has only started to revive. We hope that the virus will be beaten within a short period of time, but no one knows when that will be, experts opinions vary from July this year to next year.
The foundation of the Cyprus economy is tourism, which will not reach last year’s four million of last year. Even with the bookings earlier this year, arrivals wills be reduced at best by 50, which will bring everything upside down. This inevitably seriously affects the economy and the expected growth of 3% pa does not look likely to be attained. In terms of tourism this will also affect all the other competitive countries of ours but then, we have the real estate market/building industry, being the third largest foreign/earner which other countries they do not have.
The measures taken by the government will have repercussions on the Cyprus Investment Scheme, the income of employees and business, the outstanding debts of developers and others, all of which are expected to reduce demand from locals as well as from foreign buyers. The reduction/uncertainty of income among locals will also affect the local real estate demand/market to buy.
Will this cause a reduction in sales prices of real estate? In our opinion definitely yes, with the extent of the reduction depending on the time frame that these measures are in place.
This again will increase demand at least for this/next year for rentals, especially for residential apartments in all towns possibly increasing rental levels further. To this end the new restrictions of the Airbnb (in addition to tourism reduction) will increase somewhat the supply at least for the summer season, having a sort of a counterweight to rental levels/demand.
It is certain that business/government will suffer, but on the other hand the various measures (e.g. working from home) might be to our benefit with a new way of doing business and which might be adopted post the virus era (less office space requirement, internet conferences etc). If successful, there is no turning back which might at the end work to the benefit of the economy.
At this point of time will there be “opportunities” for the reduced sales prices? Yes, we expect so depending always on the time frame, especially for those units that are directed towards the foreign market.
The plight of other competitive countries has helped the Cyprus economy in the past, this time however the circumstances are different since we have in addition to the above, the “oil war” between Russia and Saudi Arabia, which has dropped oil prices to a historic low.
The world economy is now in trouble and it seems that yet again real estate in Cyprus remains the only ‘stable’ investment in terms of returns and security of asset/rental income (for the local residential owners).