The Only Way is Up
Source: http://www.cyprusprofile.com/en/sectors/construction-and-real-estate
The property market of has enjoyed a resurrection in the past year, with sales rising by a remarkable 43%, spurred on by landmark projects, incentives and an influx of foreign investment.
High quality of life, year-round sunshine, and a convenient location between three continents, has made Cyprus a longstanding magnet for international investors, expats and retirees. Despite the uncertainty of fluctuating global economic cycles, these factors have continued to contribute to the enduring appeal of the island. Incentives coupled with a fall in real estate prices triggered new interest in the middle and lower end of the market, while sales of luxury developments have surpassed expectations.
Recovering Market
After a series of declines over the previous six years, market prices are stabilising, competitively priced properties are attracting buyers, and both residential and commercial investments are on the cusp of a significant era of growth. This across-the-board improvement is mirrored in the broader economy, which is predicted to expand by almost 3% in 2017.
Demand is strongest in Limassol, where the number of sales increased by 59% in 2016. Island-wide, the prices for flats and houses rose by 0.6% and 0.9% during the third quarter of 2016, according to the Royal Institute of Chartered Surveyors, with significant increases in Larnaca. There was a corresponding upward trend also in rental returns during this period, with average gross yields for apartments at 4%, houses 2% and shops at 5.4%.
Growing Foreign Investment
Contrary to expectations, the financial challenges of 2013 have not had a long-term impact on the island’s popularity amongst overseas buyers. The pull factors of a relatively low cost of living combined with an attractive climate, its status as the 5th safest country worldwide, and a good quality of life have all proved to be more enduring than any short-term fluctuations in the economic climate. Recent 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 developments have had a positive effect on sales, and the second quarter of 2016 was marked by a significant revival of overseas interest in Cypriot real estate. Traditional markets such as the UK and Europe have expanded, and the number of investors from China and the Middle East has also grown. Property purchases completed by overseas buyers increased 63% year-on-year in the first three quarters of 2016, with overseas buyers making up 14% of all real estate transactions. This surge in interest was also reflected in the latest figures for foreign direct investment in Cypriot real estate, which exceeded €2 billion in 2015.
Enticing Incentives
Traditionally, Cyprus 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. Today, the sector is pursuing a more innovative strategy, targeting top-end clients with a range of exclusive villas in five-star complexes, golf course and seafront developments as well as boutique townhouses. The challenges faced by the banking sector in 2013, prompted the government to introduce tax reforms designed to kick start the Cypriot property market and benefit existing and prospective buyers. 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.
One of the most innovative government measures that has helped the Cypriot construction sector bounce back has been the naturalisation scheme. Recent studies conducted by global immigration experts rank the Cyprus Citizenship by Investment programme amongst the top ten worldwide. The scheme was introduced by the government to attract more high-net-worth individuals, investors and entrepreneurs with the benefits available to a Cyprus and EU national.
The programme offers individuals 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 investor chooses to invest only in residential properties in Cyprus, their investment is limited to €2 million. Investment options include real estate, investment in Cyprus companies and in investment funds and bonds, or a combination of the above. Approximately 1,000 properties were purchased by non-EU nationals in 2015 in connection with the scheme, which has so far resulted in an additional €3 billion of investments in the island.
The naturalisation initiative has been particularly popular amongst Chinese nationals, whose investment is credited by the Chamber of Commerce with helping in the economic revival of the construction industry. Chinese investment is also behind a large-scale construction project at Ayia Thekla in the Famagusta District, branded the Sun City Spa and Residences. The €50 million project will include a five-star resort hotel and exclusive beachfront residences that will put Ayia Thekla’s pristine stretch of coastline on the map.
A New Limassol Skyline
An exciting race is on amongst property developers in 2017, as they compete over imaginative and ambitious projects, such as the largest marina or the tallest luxury residential tower on the island’s coast. The Limassol skyline is undergoing a multi-million-euro transformation, with the construction of luxury high-rises. Two of these, The Oval and the recently launched Lanitis Towers, are the brainchild of the Lanitis Group.
The 75m Oval, overseen by Lanitis subsidiary Cybarco Development, is an innovative and high-end office complex, with an iconic oval structure. With an exclusive address on the Limassol seafront, the landmark design has configured its space so all offices can maximise their Mediterranean Sea views. The venture, with an estimated price tag of €30 million, has already paid dividends. Approximately 93% of its office space has been snapped up – irrefutable proof that confidence in the Cypriot economy is strong.
Work on another monumental Limassol structure is underway, and at 170m it promises to not only be the tallest in Cyprus, but the tallest residential seafront building in Europe. Branded The One, the €77 million construction is a joint project with Pafilia, J&P and ACC, and is set to redefine the Limassol skyline in a spectacular and daring way. The building has 37 floors, all of which enjoy uninterrupted sea views, and so far sales to foreign investors have been brisk, with 55% of the properties already sold. The flagship project has also been commended as an outstanding example of residential high-rise development at the prestigious European Property Awards 2016-2017 in London.
The new wave of innovative architecture sweeping through the island is also evident further along the Limassol coastline in the spectacular Del Mar development. The first phase of the residential complex will be completed in the summer of 2019. Del Mar has an ambitious curvilinear design that enables each of its 168 luxury apartments to benefit from breath-taking sea views. The complex combines all the benefits of the relaxed Cyprus lifestyle with the convenience of five-star services, and to date 40% of the apartments have been sold. Extending over 34,000 square metres, the Del Mar has been financed entirely by Cypriot companies.
Limassol has also been chosen to host the country’s first-ever and only integrated casino resort complex, awarded to a consortium including the globally renowned Melco and Hard Rock. The estimated investment for this mega project is expected to exceed €650 million and will be the first of its size in Europe.
Ayia Napa Skyscrapers
The pace of change in Limassol may be frenetic, but further along the east coast in Ayia Napa, residents will soon be able to boast of their own skyscrapers. The €220 million residential properties will form part of the development of Ayia Napa marina and will rise to 26 floors, in a bid to bring a feel of the extravagant Dubai skyline to the Mediterranean.
With significant Egyptian investment, the marina properties are already being marketed to investors in the United Arab Emirates, with a price tag ranging between €500,000 and €5.2 million. The yacht marina will have a capacity for around 450 vessels up to 60 metres, with moorings out at sea for another 150 yachts. The project also includes villas, apartments, restaurants, bars, shops, cafes and boutiques, as well as event facilities, and is set to spark more interest in the Ayia Napa region.
Larnaca Renaissance
Not to be outdone, the towns of Paphos and Larnaca are also launching their own marina projects. The redevelopment of the Larnaca port and marina poses excellent investment opportunities, combining port commercial and passenger activities, with leisure, tourism and real estate development. Millions of euros have also been earmarked by Larnaca municipality for the regeneration of various districts and breakwaters are being erected to stop coastal erosion.
The ever-popular Mackenzie beach to the west of the city and close to the international airport, is about to undergo an epic transformation as part of the luxury Castle Project, funded by Lebanese investment. It will involve the construction of a €7 million seafood restaurant, a five-star hotel over 13 floors, and a beach bar and jacuzzi for 100 people. A unique feature of the project will be the construction of a small island in the shape of Cyprus.
Strategic Asset Management
At the end of 2015, industry professionals expressed concern that the island’s property sector would be the next victim of the 2013 banking collapse. It was feared that real estate acquisitions made by the leading lenders, as part of their efforts to reduce their portfolios of non-performing loans, would lead to significant market distortions. However, the loan restructuring programme has not had the detrimental impact many projected, largely due to the benchmark set by the Bank of Cyprus’ Real Estate Management Unit (BoC REMU).
Thanks to the strategic planning of asset disposal by lenders, the market has not been flooded by compulsory repossessions and real estate remains a viable investment option. The combined value of the sellable real estate assets held by banks in Cyprus is estimated to be €1 billion. BoC and Hellenic Bank hold around €370 million, while the Cooperative Central bank retains assets worth €600 million through its Property Management Directorate (PMD). BoC disposed of assets worth €92 million in the first half of 2016, and while sales are expected to accelerate, the average time to liquidate a real estate asset is between five and six years, according to Hellenic Bank.
The commercial banks continue to be rigorous in their lending criteria. As a result, the resurgence of interest in real estate investment in Cyprus today derives primarily from institutional investors and wealthy non-Europeans seeking to acquire Cypriot citizenship through the government’s naturalisation programme.
Building the Future
New investments in tourism infrastructure and hotels have given the formerly ailing real estate sector a revitalising boost. Projects with a special focus on golf courses and marinas have spurred new interest in large-scale projects in Cyprus, and the country has seen a surge of investors looking into the acquisition of entire complexes and into projects that are both in the planning stages and already under construction.
Cyprus’ ongoing process of establishing its first-ever luxury casino resort, is also set to boost tourism and fuel demand for holiday rentals. Construction is booming, from the very top of the range downwards, with the projects due for completion in the period 2016-2018 alone worth over €300 million. This is just the beginning of the post-financial crisis rebirth of the sector, and will be the driving force behind the construction industry for years to come.
All rights reserved. The material on this site may not be reproduced, distributed, transmitted, cached, or otherwise used, except with the prior written permission of CountryProfiler.
