Last month, the Cypriot property market experienced its sharpest decline since 2013 – during the island’s financial crisis – when the number of transactions dipped to 216, an 80 percent contraction compared to April 2019, when a total of 1,057 property sale contracts were deposited in the nation’s Land Registry offices.
A mitigating factor in the number of contracts filed at this time last year was the rush to complete property transactions before new, stricter criteria for foreign investors was enacted under the Cyprus Investment Programme. When the whole year to date is considered, the number of property sale submissions has fallen 36 percent.
This contraction has affected the entire island, with sales in Famagusta down by 90 percent, while both Larnaca and Limassol saw a decline of 83 percent. In Nicosia, sales fell by 78 percent, whereas Paphos saw a 68 percent drop.
Mixed Views on Recovery
In a Financial Mirror op-ed discussing the matter, Cypriot property specialist Panos Danos, of Danos Associates, wrote that the island’s market is currently extremely volatile due to the rapid onset of the pandemic with stable trends being very hard to identify. Danos notes that despite the scale of the crisis, there remains considerable opportunities within the Cypriot market, arguing that the longer-term outlook is good. He expects the island-nation’s property market to experience a healthy recovery in 2021.
“People will never stop buying or renting homes. In Cyprus, most developments are qualitative and if their price levels remain reasonable, they will soon be met by demand. In addition, property as an investment vehicle during the current situation gains popularity as the deposit interest rates are virtually zero. Of course, everything will depend on the length as well as the depth of the crisis and the economic aftershocks it will leave on the property market,” notes Danos.
And yet, other experts disagree.
Prior to the pandemic, some specialists pointed to the decrease in property prices last year as a sign that the country was in danger of creating another housing crisis, with the number of foreign investors adding to the country’s exposure. Writing in January 2019, Nobel Laureate economist Christopher Pissarides said a bubble was being created in the Cypriot economy on the back of the country’s “citizenship for investment” protocol.
“Fast-rising property prices and increased construction activity are risky, and not a good sign for the economy, which might be damaged in the future,” said Pissarides, before taking aim at non-EU citizens’ availing of passports by way of property investments.
“What they’re after is a European passport. I’m in London now, and I bump into people who tell me they live in the UK but have a Cypriot passport. When I ask them how they got the passport, they say ‘Oh, I bought a house in Limassol’.” In 2018, almost half of the 9,242 property sales on the island were to foreigners, with 2,939 to non-EU nationals.
Pressure from EU on Passports
The European Union has again turned its fire on so-called ‘golden passport’ schemes, eyeing Malta, Bulgaria and Cyprus. But the government in Nicosia is adamant that sufficient safeguards are now in place, having said they have no intention of ceasing their current system.
“With the measures which have been taken after May 2019 we see no reason as to why it should be stopped, but also the checks now go above and beyond,” said Interior Minister Nicos Nouris. These measures include the review of previously granted citizenship requests, which led to the revocation of passports granted to wealthy Russian investors such as Oleg Deripaska, an oligarch with close ties to the Kremlin. Deripaska had previously been granted Cypriot citizenship in 2017. Defenders of the scheme argue that the initiative creates jobs and investment throughout the island.
With tourism expected to operate at only a small percentage of its normal capacity, and with increasing uncertainties surrounding the energy market, Cypriot banks and economists are hoping that the property sector can provide an indicator of economic renewal in the medium term. With much of its investment portfolio targeting the higher end of the market, the effects of the pandemic throughout wealthier nations will likely have a deep impact on the scale of the recovery – or potentially steeper decline – of the island’s property market.