During a few months, the coronavirus pandemic has fundamentally changed the situation in the Cyprus real estate market.
In Cyprus the construction industry suffered the most, which, in addition to everything, also suffered from the closure of the Citizenship by Investment program.
As you may know, in October 2020, the activity in construction fell sharply. The number of news building permits fell by 15.5%. In total, developers received 583 licenses (for comparison to 690 in September 2020).
The total cost of licenses issued in October 2020 increased to 279.3 million euros, compared with 201.6 million euros in the previous month. 903 houses received a building permit, with a total area of 239,300 m2. In September this figure was 201 600 m2.
It should be noted that the increase in the cost and total area of new real estate objects is explained by larger projects, the permits for which were issued in October.
The number of issued construction licenses decreased by 3% in the first 10 months of 2020, the total number of permits was 5689 versus 5864, compared to the same period in 2019.
The total cost of these permits decreased by 24.3%, while the total area decreased by 9.8%. At the same time, the number of residential buildings increased by 1.3%.
The following situation has developed in cities:
- Nicosia: the number of building permits issued from January to October 2020 decreased by 7.1% (or 2070 versus 2217 in the same period in 2019).
- Famagusta: the number of licenses issued decreased by 5.03%, to 258 against 271 in 2019.
- Larnaca recorded the largest annual reduction in the number of building permits issued - 14.5%. The total number of licenses was 768 (898 in January-October 2019).
- The number of permits issued in Limassol also decreased by 7.4% to 1648. By the way, in 2019 this number was 1780.
- Paphos: the number of building permits decreased by 8.5%. The total number of licenses issued was 785, (858 in January-October 2019).
Nevertheless, despite all the negative consequences, real estate experts do not lose hope for an early recovery of the market.
As it turned out, many are betting on companies from the UK.
In their opinion, it is possible that (due to Brexit) organizations targeting the European market will decide to move their headquarters to Cyprus. This should create demand for offices and homes for their employees.
Despite the fact that the real estate sector is going through a difficult time, experts are confident that it will deal with all the problems due to the permanent demand for housing, especially in the Nicosia and Famagusta areas.
In addition, Konstantinos Savvides, director of PwC Real Estate Consulting, noted that the increase in building permits in Nicosia, a market dominated by local buyers, indicates a demand for housing projects.
There is clearly a satisfactory demand from the domestic market, especially for housing projects of up to €400,000, said Savvides.
He expressed confidence that the interest of local residents in real estate in Cyprus is maintained thanks to the program of state subsidies of interest rates on housing loans.
This is backed by reports of an increase in housing loans given out by banks in the past year, Savvides said.
He added that many participants in the Cyprus property market are betting that UK firms will move their headquarters along with their staff.
Foreign Direct Investments are extremely important for the Cypriot economy. The success of efforts put forward by the authorities to attract foreign firms to Cyprus, luring them with incentive schemes, will be decisive for the future of the industry, Savvides said.
According to Savvides, companies need Class A offices and their employees need homes, which means a new round for the construction sector. At the same time, he noted that the format of remote work from home due to the coronavirus pandemic can still make some adjustments.
Savvides stressed that all parties need to be patient and follow the market over the next couple of years to have a clear idea of where the industry is heading.
In turn, Danos / BNPPRE Group CEO Panos Danos said that 2021 could be a positive year for the Cyprus property market, the new year can give new investment opportunities due to the deferred demand for travel and leisure.
He noted that property prices and sales contracts have declined in Cyprus, mainly due to the pandemic, which has caused travel restrictions around the world. Danos said that despite the closure of the citizenship scheme, Cyprus has other opportunities to attract foreign investment.
By no means should we revive the passport scheme. However, we can draw in businesses with our relocation incentives, with Brexit creating some opportunities. Companies doing business with the EU, but headquartered in the UK, will be looking into relocation options, with Cyprus having a lot to offer, Danos is convinced.
Real estate analyst Nigel Howarth said that 2021 will be a difficult year for the Cyprus property market, mainly due to the uncertainty surrounding the coronavirus pandemic.
"But once COVID has been suppressed and travel starts to return to normal, maybe the market will start to recover during the third quarter", Howarth shared his opinion.
Commenting on the impact of canceling the Citizenship by Investment scheme, which was based on the sale of real estate, Howarth said that this is not such a big problem.
“It is possible to obtain Permanent Residency in 2 months by buying a new property from a developer valued in excess of €300,000, plus some other conditions. There’s no obligation to live in Cyprus, just need to visit every two years. If they want citizenship, they can apply after seven years of residency.” said Howarth.
Howarth also confirmed that rumors in the real estate world indicate that many UK firms and citizens are already considering moving to Cyprus due to Brexit. And this is very beneficial for the country.