2020 Cyprus Country Report

To adapt to this new reality some developers
are now planning to change use from residential
to office or hotel accommodation, which they
hope will be in greater demand when the market
starts to move again. Industry experts say the
prominent marina, casino and Larnaca port projects
will all suffer delays in the short to medium
term. These unexpected events will result in a
reduction in pricing through the market, but
quite how low prices will fall remains to be seen
and will also depend on when the demand will
start again and what additional incentives the
Cyprus government may introduce.
With foreign buyers constituting such a large
proportion of all transactions, the residential
market is certain to take a hit, as investors will
be revising their investment plans and reluctant
to invest in foreign markets due to the general
insecurity and problems in their home countries.
This could also have an effect on FDI interest
in large-scale infrastructure projects.
Demand for office space could see some
changes too, as companies and organisations
reconsider their plans for new offices after the
lockdown forced a universal remote-working
trend with many employees working from
home. On the other hand, logistics, warehouses
and industrial operations have benefited from
this crisis due to the massive increase in e-commerce.
A key challenge, which remains a legacy
problem for Cyprus and could have longstanding
effects on the real estate market is the local
banks’ growing property portfolios acquired
through repossessions and debt-for-asset swaps
to restructure the burden of non-performing
loans – an unfortunate by-product of the financial
crisis. The question remains what effect the
gradual unloading of these properties into the
market will have on today’s fiercely competitive
environment.
BUYER SAFEGUARDS
Changes to the law relating to title deeds have
ramped up protection and peace of mind for
prospective buyers, with additional legal safeguards
streamlining processes and efficiency.
These types of measures have also paved the way
for increasing confidence to invest in Cyprus
real estate. As in all markets, prospective buyers
are advised to seek independent legal advice
before purchasing real estate. The island has
mainly been on the radar of British buyers, due
to the countries’ historical ties, strong tourist
market and attractive tax treatment – an incentive
that may disappear with Brexit. The
Immovable Property Tax (IPT), which was significantly
reduced in 2016, has been abolished,
while temporary reductions in property transfer
fees introduced in 2015 have been made permanent.
Purchases that include VAT incur no
property transfer fees, while VAT-exempt purchases
incur only 50% of the previous fees. In
addition to the UK and Europe, interest from
investors in China, Russia, the Middle East, and
beyond has also grown – though on hold temporarily
due to the pandemic.
MOVING UPMARKET
Cyprus has confidently forged ahead into the
luxury market direction – a fact evident in the
number of extravagant residential developments
rapidly rising up along the coast and most exceeding
the half million price tag. These range
from apartments in architecturally unique highrises
to exclusive villas in five-star complexes, golf
course and seafront developments as well as boutique
townhouses.
HOME IN THE SUN
Since 2001, there has been an overall expansion
of the real estate market and the arrival of large
global companies and private investor-residents,
which have changed the image of Cyprus and
its property sector. More recently the industry
has seen fast expansion and made bold moves
to upgrade and diversify its offering, and also to
bring more 21 st century innovation to its projects
to build a more sustainable sector.
Cyprus has one of the highest home ownership
rates in Europe and also has a longstanding
market for second homes and holiday
villas, making the economy heavily reliant on
the sector. The growing appetite of foreign
buyers and investors is raising confidence in
the Cypriot market, and renewed interest in
large-scale projects in Cyprus has seen a rush of
foreign investors looking into the acquisition of
entire complexes and projects that are both in
the planning stages and already under construction.
The coronavirus pandemic might delay
some of these developments, but the significant
investments into real estate of the past few years
have certainly once again raised this sector to be
a key driver of growth in Cyprus. Adaptability,
diversification and sustainability will be absolutely
key moving forward and to secure the
future. n
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Sector Profile
Country Report CYPRUS 2020 73