The Cyprus property sector has been reinvigorated by the country’s robust economic recovery over the past few years. Investment is pouring in, exciting projects are springing up, and sales are rising – proving the sunny Mediterranean island has not lost its curb appeal.
Cyprus real estate is bouncing back to boom time, with the industry confidently shaking off the shackles of the crisis years. Confidence levels in the sector have been steadily rising with 2016 and 2017 showing strong market performance, and the upswing continuing straight through to 2018. Major projects are forging ahead with more planned and in the pipeline, and residential housing projects as well as luxury developments are back in demand. In fact, 2017 saw an impressive 45% increase in sales contracts for high-end residential properties. Cyprus’ appeal has remained strong amongst international investors, expats and retirees thanks to its Mediterranean climate, high quality of life and safety, as well as its status as an EU member state conveniently located between three continents. Interest from foreign house hunters and investors has once again become a driving force of the sector.
Growth in all property indices was recorded in 2017, proving the steady boost in demand for Cyprus real estate. Transaction volume rose by 24%, with the majority recorded in Limassol, although the highest annual growth in sales contracts was in Famagusta, followed by capital city Nicosia. Sales to overseas buyers increased by 33%, with Paphos and Limassol by far the most popular areas and together constituting 70% of sales. Limassol also attracted around 52% of all high-end residential property sales. Similarly, the construction sector has seen healthy growth, with the value of new building permits increasing by 49% on an annual basis across the country, with Nicosia recording the highest concentration of new developments licenced in 2017. In 2018Q1 building permits recorded a 27% rise, with the strongest driver being investment in commercial projects.
Real estate prices have also gone up and according to the Royal Institute of Chartered Surveyors (RICS) residential property price indices showed a 4% hike in 2017Q3 compared to 2016Q4. From 2010 to 2016 commercial real estate prices took a nosedive, but 2017 saw marginal growth again with retail property prices increasing 3%, and offices by 7% – mainly driven by the fresh demand for Grade A office space with Cyprus’ appeal growing as a convenient headquartering location. Interest rates on housing loans have been decreasing consistently since 2012, and by the end of 2017 rates decreased to 3.18% compared to the 2012 peak of 5.16%.
Following a period of doom and gloom for the construction and real estate sector, 2014 marked the year when activity and confidence began to finally increase. Two years later Cyprus recorded an impressive 43% year-on-year upsurge in transaction activity signalling a new era of growth for the struggling industry. This improved climate was driven by the country’s rapid post-crisis economic growth, the introduction of new and attractive property tax incentives, increased demand from the domestic sector, as well as the programme for naturalisation of investors which attracted mainly non-EU buyers to invest in Cyprus property. This scheme, which was launched in 2013 to help stimulate economic recovery after the financial crisis, has since been amended to enforce more stringent requirements and limits on applicants and is now called the Cyprus Investment Programme. Another factor contributing to the turnaround in the property market over the last few years has been transactions recorded by banks in implementing debt-for-asset swaps to restructure the burden of non-performing exposures – another unfortunate legacy of the financial crisis, however banks are once again better positioned to grant property loans. 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, which contributed 14% to Cyprus Gross Value Added (GVA) in 2017.
Incentives and 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. The island has mainly been on the radar of British buyers, due to the countries’ historical ties, strong tourist market and attractive tax treatment – particularly for expats and retirees who pay just 5% tax on pensions, a carrot that may disappear in the wake of Brexit. The Immovable Property Tax (IPT), which was significantly reduced in 2016, has now 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. This swell was also reflected in the figures for foreign direct investment in Cypriot real estate, which has exceeded well over €2 billion in the last few years.
Although property hunters are spoiled for choice, Cyprus has staunchly headed more towards the luxury market direction – a fact evident in the plethora 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 high-rises to exclusive villas in five-star complexes, golf course and seafront developments as well as boutique townhouses. This segment of real estate and construction has significantly benefitted from the aforementioned Cyprus Investment Scheme, which was introduced by the government to attract more high-net-worth individuals, investors and entrepreneurs to the island. The programme offers individuals EU citizenship with the opportunity to reside indefinitely in Cyprus if they acquire a permanent residence worth €500,000 and invest a minimum of €2 million in a business venture. If an applicant chooses to invest only in residential property in Cyprus, their initial investment is €2 million. Investment options include real estate, investment in Cyprus companies and in investment funds and bonds, or a combination of the above. The scheme, which was originally launched to help kickstart the economy in 2013, has to date garnered more than €5 billion in investments to Cyprus.
The coastal city of Limassol, which is also a thriving business centre and international shipping hub, has seen the most dramatic change in the wake of the building boom. Skyscrapers of all shapes and sizes are starting to emerge along the seafront road promising to redefine the city’s skyline. Work on a monumental Limassol structure is underway, and at 170m it claims to not only be the tallest in Cyprus, but the tallest residential seafront building in Europe. The €77 million construction by developer Pafilia and branded The One enjoys uninterrupted sea views and was commended as an outstanding example of residential high-rise development at the prestigious European Property Awards 2016-2017 in London. The spectacular curvilinear Del Mar development by Leptos Estates has been financed entirely by Cypriot companies and has already exceeded sales targets with expectations to deliver the first of its 168 apartments in 2019.
The London-based Marr Group with its local arm Marr Cyprus is another cutting-edge real estate development and investment company that is currently working on the exclusive 110 metre Marr Tower in Limassol, set to also make its mark on the changing skyline of the city. Adding to the new look of Limassol are also the innovatively designed luxury high-rise apartments i100 and iHome by D.T.A. Developments & Construction, which has been involved in a wide range of prestigious residential and commercial construction projects in Cyprus over the years. The Oval and Lanitis Towers, by the Lanitis Group, are other prime examples of innovative real estate development. The 75m oval structure is a high-end office complex overseen by Lanitis subsidiary Cybarco Development, which is also responsible for the €150 million Trilogy project. The residential and commercial development on the seafront launched sales in 2018, with expectations to deliver two of the three Trilogy towers by 2022.
As grand as these ambitions are, the high-rise trend and speed at which these buildings are springing up has also had a somewhat polarising effect, with some residents expressing concerns of their impact on the city and its environment – and not without reason, as in the first quarter of 2018 the government has issued permits for 25 high-rise buildings with 60 more pending, with most of them in Limassol.
Limassol will also be the home to the island’s first-ever and only integrated luxury casino resort. The almost €600 million casino – which is being run by the consortium of Integrated Casino Resorts Cyprus (ICRC) which includes the globally renowned Melco Resorts & Entertainment Ltd – will have extensive facilities and exceed five-star status. The resort project is Hong Kong-based Melco’s first expansion outside of Asia and promises to be the biggest casino of its kind in Europe. The gaming area at the casino is set to span across 7,500 square meters with about 1,200 gaming machines and 140 tables. Over 9,600 square metres will be for convention, meeting and event spaces and 1,200 square metres of retail area replicating the feel of the old Nicosia city centre. The resort is expected to contribute €700 million annually to the economy from the second year of being fully operational, revenue which is projected to be 4% of the country’s GDP according to the President of Cyprus. The project will also support the local construction industry as it is expected to create around 4,000 jobs each year during the construction period. In addition, it will contribute an estimated 6,500 direct and indirect full-time positions in Cyprus when fully operational. Until the resort opens its doors, a temporary casino has been set up in Limassol and satellite casinos are in the pipeline. According to recent reports, one location will be at Larnaca airport, while the consortium will also operate satellite casinos in Ayia Napa, Nicosia and Paphos, with the latter two opening in October 2019.
Following the success of already-established Limassol Marina, other coastal towns are following suit and reimaging their ports and marinas. Ayia Napa will soon boast a €220 million project featuring twin skyscrapers and a yacht marina for 600 vessels. Backed by Egyptian business magnate Naguib Sawiris, and already marketed to investors in the United Arab Emirates, the project is set to transform the status and interest in the Ayia Napa region. Plans for marinas in Larnaca and Paphos are also underway. Three companies have been shortlisted to proceed to the next phase in the tender to redevelop the Larnaca port and marina, which will feature around 1,000 berths including some for superyachts. The contract to build the Paphos marina was awarded to developer Pafilia in July 2018, and the €240 million project will provide a capacity of 1,000 berths and more than 42,000 square metres of residential and commercial developments.
Tourism Real Estate
Tourism-related real estate and infrastructure continues to be one of the most attractive investment opportunities in Cyprus, evidence of this is the number of foreign investors closing multimillion-euro deals in the last three years. Most recently, the global luxury hotel chain Sofitel announced it will build a five-star €300 million spa resort in Limassol with Oxley Holdings and Planetvision Properties. Works are set to begin in September 2018, with completion expected in 2022. Others include the prestigious Sun City Hotel by the Chinese group Jim Chang Global in cooperation with the Giovani Group with initial investment of €100 million, the upcoming launches by the Rezidor Hotel Group of Larnaca-based Radisson Blu Hotel and Residence and the Radisson Blu Conference and Airport Hotel – which will be the island’s first airport hotel – as well as the €71 million deal on Amathus Beach Hotel in Limassol. More investment has flowed into Limassol with the new Parklane Luxury Collection Resort & Spa replacing the popular Le Meridien. The hotel is undergoing a major luxury renovation, designed by Harrods Design Studio and is estimated to cost €70 million. Other major international deals were the acquisition of ‘The Alexander the Great Beach Hotel’ in Paphos and South African Atterbury acquiring two of the country’s flagship Nicosia retail outlets, the Mall of Cyprus and the Mall of Engomi, for €200 million.
Real Estate Renaissance
New interest in large scale real estate projects in Cyprus have spurred on a veritable construction boom, and the country has seen a surge of foreign investors looking into the acquisition of entire complexes and into projects that are both in the planning stages and already under construction. These new investments have certainly sparked new life into the real estate sector and support the country’s efforts in maintaining the momentum reached in tourism growth and residential property sales – the success of which is also filtering into and benefiting other economic sectors of the country. Albeit some industry experts preferring to err on the side of caution and voicing concerns of the rapid development, there are certainly multiple opportunities for both holiday home seekers as well as serious investors in the Cyprus real estate market. And with prices slowly creeping back up, those with capital and the ability to move fast are sure to reap the rewards.
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