Luxury real estate may see a dramatic downturn this year, as the Cyprus Investment Program is no longer available to foreign investors, plus the pandemic has made market conditions even worse. The bad taste left by Al Jazeera videos pushed further the retreat by foreign buyers and may send prices spiraling to 2013 era levels.
Foreign buyers – who have helped fuel the push in premium homes and high rise building apartments (mainly in Limassol and Pafos) – are on the wane. According to DANOS International Property Consultants and Valuers, the volume of foreign purchases shall see a sharp drop in 2021.
The reasons include limits on taking cash out of foreign countries, anti-corruption laws taking effect, market saturation, rising property prices, the lack of citizenship incentive and concern about the stability of the EU economy, market and political situation.
The Limassol real estate market should slow significantly, said Panos Danos CEO of DANOS, as deal volume across the city of Limassol is expected to fell down at least 25 percent.
The average price for a high rise tower apartment is expected in 2021, as well.
If you look around Limassol at all these 15-28 storey modern towers with starting prices at €6,000 a square meter of a luxury apartment, people living in Limassol, aren’t buying them.
Real estate sales in Pafos and Larnaca will also feel an impact. Prices will also slow down for the above mentioned multiple reasons, and again, manly, because interest from abroad has dried up significantly.
The driver of our real estate business has mainly been Russia and China, with 35 percent of real estate business in Limassol historically coming from foreign investment.
If you look at the real estate market, we had a tremendous amount of buyers who came in because of the Cyprus Investment Program and prices were down. Now prices are much higher, both absolutely and due to previous demand.
Then there is European and USA political instability. Also because of the pandemic – economic uncertainty, we are seeing people in Cyprus, selling their property to save money or simply to pay back their bank debts. It’s serious – people can’t rely on their business for enough income.
That’s probably been the biggest impact. Then you have the Turkish occupation and provocations making a big impact on uncertainty. In our current financial and political climate, we’re not viewed to be as stable as we once were.
One source of funding for some percentage of buyers was “questionable money”. With the gradual enforcement of legislation, however, forced identification of buyers in areas with many all-cash transactions that raised questions about money laundering, led to deteriorate significantly in numbers, the “dodgy” buyers.
In real estate, there was the ability to protect the identity of the owner, but only when was done for legitimate reasons. For example, a celebrity might not want to attract crowds of gawkers. But, now, even in those cases the government insists on knowing the ultimate buyer.
For now, when it comes to upscale real estate, many properties that once would have attracted buyers shall sit empty, until market conditions settle, the covid vaccine is available and the Turkish provocations are resolved peacefully.
Panos Danos BSc FRICS CEnv VRS IPF ASA