Cyprus has entered the new year with continuous growing demand for Luxury Real Estate fuelled by the sustained economic growth and flowing interest of international investors.
The economic growth and fiscal performance continued to exceed expectations in recent month, with IMF forecasting GDP growth of 4.2% for 2019. This places the country among the highest accelerating economies in Europe. The growing employment rate and growth of wages in turn fuels the domestic demand for real estate, while ever growing interest from foreigners in Cyprus Investment Programme continues to contribute to rising demand in top end real estate market of Cyprus.
Cyprus Investment Programme, first introduced by the government to help the country deal with the financial crisis of 2013, currently requires a minimum investment of €2,000,000 into the country’s real estate, Cypriot companies, financial assets like bonds or Alternative Investment Funds, or a combination of such. As part of the requirement the applicant must purchase a primary residence in Cyprus of at least €500,000 (plus VAT), which then must be kept for life. The remaining investment assets of € 1,5 million may be sold after the period of 3 years.
Needless to say, majority of the investors wishing to apply for EU citizenship through this programme choose to go through the real estate route, boosting as a consequence the elite real estate sector in Cyprus. Interest from the foreigners, predominantly from non-EU buyers, continues to be the driving force on the market.
The Cyprus Investment Programme scheme is one of the fastest routes to European citizenship, allowing the applicant to receive the EU passport within approximately 6 months. This is reflected in the figures – at the moment approximately 70% of real estate acquired by foreigners relate to non-EU buyers. The majority of foreign buyers are coming from Russia and the CIS countries (the Commonwealth of Independent States), as well as from China, India and the United Arab Emirates. There is also some interest from the wealthy British buyers stress-proofing themselves from the potential consequences of Brexit with European citizenship in Cyprus. Until late 2018 there has been 103% increase in comparison to the previous year in number of contracts of sale submitted to the DLS by non-national citizens, reflecting the growing interest of foreign buyers. Steadily increasing demand of international buyers in Cypriot properties is represented in data of high value residential properties transactions (€ 1mil+), which has been showing the compound annual growth rate of 88% from 2013 to 2017.
According to the latest data, 65% high value residential properties transactions are of the volume between €1-2 million, 27% in the €2-3 million region and only 8% over €3 million. Understandably, majority of the transactions are within the minimum €2 million budget which qualifies for the investment scheme.
The two cities most favourable by international buyers in Cyprus and therefore most influenced by the Cyprus Investment Programme are Limassol and Paphos, combined they make up 92% of high-end residential property segment of the market. Both coastal cities, they attract foreign buyers by proximity to the sea and potential to be used as holiday properties for those not willing to make Cyprus their permanent residence. With Limassol attracting mainly by city’s reputation as centre of the island’s life, nearby Paphos provides access to the airport and connection to the rest of the Europe.
Limassol is probably the most cosmopolitan city of the island, with many direction signs written in English, Russian and Chinese. The city has been heavily influenced by Russian emigres for decades before the Cyprus Investment Programme has come into force, and recent inflow of capital from Russia, Asia and the Middle East contributed to its further development as cosmopolitan centre of the island. In Limassol the largest volume of high value residential property transactions are flats. The demand is particularly high for see-view apartments in tall residential buildings. In Paphos, in contrast, the majority of high-value sales are attributed to private houses, or villas as they are known in Cyprus, offering international investors a private pool and the outside space required to make a property perfect family vacation home for those currently residing elsewhere.
Nicosia, the capital of Cyprus, is the most neglected from the larger cities in terms of international investments, one of the main reasons probably being its location inland away from the seaside. At the moment the property market of Nicosia is predominantly appealing to the local segment as many Cypriots live and work in the capital, therefore making this city more resistant to real estate bubble or mass-sell of international investors in the future. However, it looks like Nicosia might soon absorb its own flow of international investment in real estate as Nicosia district has been issued with the highest number of new building permits in 2018, making a path for development of the capital over the coming years. The time will show if the future developments in the capital will become of interest to the foreign buyers or spread among mostly domestic market, but significant development is definitely on the way.
Another promising investment spot is Larnaca, which offers the seaside, proximity to the Larnaca airport, and property prices still in their infancy in comparison to fast developing Limassol.
Overall the new building permits on the island are continuing to enjoy steady growth over the past few years, assisting the increased construction activity in Cyprus. Around 70% of building permits issued in 2018 are for residential development, showing that Cyprus is actively ready to welcome new buyers, domestic as well as international individuals interested in Cyprus Investment Programme alike.
The Programme, however, has attracted criticism from the EC amid the worries that such investment schemes might facilitate money laundering, opening the doors to entire Europe for individuals whose origins of wealth remains unclear. Cyprus has always maintained that all international applicants for citizenship through investment are undergoing rigorous checks, however the island continues to be under the pressure to implement further control procedures. The recent changes in Cyprus requiring stricter source of wealth checks and introducing the registrar of authorised agents for the programme aim to regulate the scheme. The EC is looking to further monitor the programme, raising the questions for how long the current opportunity to receive European passport through Cyprus Investment Programme will be available.
Meanwhile, construction is booming and demand for high end residential properties in Cyprus continues to grow. Aside from the numbers, amazing weather, fresh food, high quality residential developments and convenient location in proximity to the rest of Europe is likely to keep Cyprus on the list of one of the most desirable countries for international buyers.
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