The real estate trend in Cyprus over the last several years, has seen a significant increase in its supply-side for high-priced premium residences. This has mostly been a result of the Cyprus Passport Scheme, a scheme which till recently, gave investors the right to a Cypriot Passport with an investment of at least €2 million. One of the easiest solutions to access this scheme was to invest in high-priced premium residences which saw an influx of foreign investment as well as high-priced premium residences themselves.
The vast majority of buyers for those passports, were from both Russia and China. However, due to the unprecedented effects of COVID-19, the demand for these citizenship schemes drastically decreased throughout 2020. Due to the severe travel restrictions imposed, Chinese activity on the island has been almost non-existent in 2020, as potential buyers could not travel to the island and in most cases not move funds.
Moving forward through 2021 however, the passport scheme will no longer be available as, from the 1st November 2020, the Cyprus Government plans to terminate the scheme due to an external investigation by a media outlet showed “weakness and abuse” of the scheme. As the seven-year-old scheme will no longer be available, it could potentially result in a decrease in demand for the previously highly sought out premium residences. This will have a ripple effect through the real estate market, and it’s expected that this sharp decrease in premium residence will see prices drop throughout the market.
The truth of the matter, however, is that since the pandemic hit Cyprus, the real estate market on the island came to a complete standstill with a whole host of projects halted. This was the case for projects that were half-way complete as well as, any agreed and signed proposals. Developers that had the foresight of the overall situation had scaled down projects throughout 2019 in anticipation of decreased demand. Others however, whose developments were earmarked for residency purposes have been left with a large stock of unsold units and no end date as to when things will pick up again. Developers are now planning to transition the projects from residential property to office space or even for hotels. A move they hope that when the market picks up again, will allow them more maneuverability and be able to sell.
A multitude of projects that were in development when the pandemic started came to a halt and left unfinished with significant delays. Projects such as the Larnaca and Ayia Napa marinas have suffered as a result, as well as the highly anticipated “City of Dreams Mediterranean” Casino Resort. The result of these delays, as well as the uncertainty of the future, will possibly result in a softening of pricing throughout the market.
The most affected sector will inevitably be the Retail sector, as alongside the halt in expansion plans came the reduction in rental prices imposed by the government to help those struggling financially due to loss of considerable income due to the lockdown.
With Foreign Investors hesitant to invest in foreign markets due to uncertainty in all markets, the residential market will also bear a significant impact. As 50% of residential buyers in Cyprus are foreign, it leaves the residential market with a big gap to fill.
Decreased Demand
The decrease in demand from the local Cypriot market will also have an inverse effect on the market prices, as the rise in unemployment and reduction in financing from banks means residents will be less likely to buy new property.
It seems that the rest of 2020 and the start of 2021 will be challenging years for property investments as its expected that Russian, Chinese and Israeli demand will be on hold, both due to the pandemic, as well as the ceased Passport Scheme. Governmental intervention will be needed to help garner the interest of these countries in order to create a positive “investment environment” and put confidence back into the market. The rate at which these reductions take place, are largely based on this intervention by the Cyprus Government and what incentives they will be willing to put forth in order to kick start demand again.
The global pandemic created a new “working from home” trend in 2020 which saw companies drastically change the way they view the office workspace. Seeing this rapid increase in “working from home” and that their employee’s productivity levels were sufficient or even better, organizations will begin to reconsider the necessity for new offices.
Unlike the office workspace, workspaces such as warehouses for logistics and industrial spaces have thrived due to the increase in demand for e-commerce by shoppers in lockdown. A trend that is expected to continue moving into 2021, as a lot of first-time online buyers experienced the ease of online shopping.
Overall, the real estate market in 2021 is expected to make a positive turn as the government is expected to find new ways to secure foreign investment as well as the uncertainty surrounding COVID-19 begins to lift and set up an exciting 2021.