Demand for Cyprus property from foreign buyers slumps

Demand for property in Cyprus from non-EU citizens has fallen, but it is unclear whether this is due to stricter government control after criticism from the European Union regarding investment in exchange for passports.

Yannis Misirlis, Deputy Chairperson of the Cyprus Association of Real Estate Developers and Landowners (LBDA), told Stockwatch Financial News that he expects clear guidance on the reasons for the decline by the end of the year. He said that at present we need annual demand for 600-700 units in the so-called “super-prime” market (skyscrapers, more than 1 million euros), and since all these high-rise projects from development to delivery take at least 5 years, the market should be able to absorb most of the units that are on the market today (if not all).

This kind of volume does not exist today. So the demand for luxury apartments is pretty good. Following criticism from the European Union and poor international publicity, the Cypriot government announced stricter criteria.

New rules

Applicants for investment must be verified by one of the three international firms selected by Cyprus, which will verify the applicants' source of income. In addition to an investment of 2 million euros (2.23 million US dollars), applicants must also make two additional contributions of 75,000 euros each to the Institute for Research and Innovation and to the State-controlled Land Management Organization.

The president of the Earth Development Organization, Marios Pelekanos, said he has collected contributions from only three applicants under the new rules. The money will be spent on affordable housing for low-income people. Pelekanos said he expects at least 300 applications to be filed within a year by July 2020. President of the Cyprus Property Owners Association (KSIA) Giorgos Muskides said he is worried that foreign investors will turn to other countries with a less demanding passport program.

“Until May, interest in investing in the passport program increased in anticipation of stricter rules and the necessary additional contributions. But the introduction of the rules and the requirement of additional contributions of 150,000 euros led to a decrease in interest in investments, ”Muskides said. “Of course, in June and July there were very few applications, and this will become apparent when the accumulated data is announced at the end of the year,” he added.

About six years after the start of investment in the passport program, about 1350 applications were processed, which corresponds to only 0.3% of passports issued to investors from third countries by all EU countries. However, 4 billion euros invested in the real estate division was enough to help the Cyprus economy recover from the crisis in 2013, thanks to the revitalization of the construction sector.