Economist Forum- Cyprus: Interweaving Extroversion with Aspiration / YIANNIS MISIRLIS
London, 5th of December
It is a great honour and privilege for me to be addressing such a distinguished audience which holds a keen interest in Cyprus’ present and future economic affairs. Allow me to express my sincere appreciation for your invitation and for giving me this unique opportunity to share some of my thoughts regarding the Economy of Cyprus and subsequently an outlook on its Real Estate Market.
As we already know, Cyprus economy has been expanding swiftly, with robust GDP growth accelerating since 2015. Employment is growing across most sectors of the economy leading to a sharp reduction of the overall Cyprus unemployment. A further boost in confidence came in September, when after more than six years, S&P upgraded Cyprus’ sovereign rating back to investment grade, signifying a stable outlook.
The Cyprus property market has been historically one of central pillars of the economic growth for the country, creating thousands of jobs and contributing significantly to the country’s GDP with a contribution to Cyprus Gross Value Added (GVA) amounted to 14% in 2017. In the years that followed year 2000, the sector’s activity expanded even further.
But, let’s look more closely the property transactions recorded over the last 18 years in order to better understand the Cyprus property market and take some conclusions. The Cyprus property market is dominated by residential real estate. The real estate is focused on second home buyers mainly because of the island’s geography and its history as a prime holiday destination.
Cyprus entry into the European Union, the attractive financing schemes available on the market at the time, and a few other important factors were the main drivers for the sector’s impressive expansion for almost a decade, between years 2000 and 2006.
The total transaction volume during that period ranging between 12,000 and 15,000 sales transactions, with the sales to overseas buyers covering around 30% on average of the market share. The property market reached its peak on 2007 and following this the market showed signs of slowdown in 2008 and unfortunately, it took a serious hit from 2009 onwards.
Following a challenging period in the construction and real estate sector, 2014 marked the year when activity and confidence began to finally increase. In a matter of four years after the peak of the economic crisis, Cyprus property transaction activity has recorded an impressive increase of 132%- signalling a new era of growth of the property market. Growth in all property indices was recorded in 2017 and 2018, proving the steady boost in demand for Cyprus real estate. According to the latest data released by the Department of Land and Surveys during the last 2 years, sales transactions rose annually by a healthy 20%. Leading to this rise, a stable assuring growth can be witnessed within the property prices. The behaviour of residential property prices across Cyprus could be captured by two indices, namely Central Bank of Cyprus (CBC) and the Royal Institution of Chartered Surveyors (RICS) indices. In 2016, price index movements recording Residential Property Prices demonstrated signs of marginal improvement and stabilisation. In 2017, for the first time during the 8-year period 2010-2017, both price indices behaved positively. During H1 2018, the Central Bank index demonstrated a 2% growth compared to H1 2017, whereas the RICS Residential index up to Q1 2018 (latest available to date), demonstrated a 5% YoY growth.
Looking closely into Cyprus’ rising local demand: currently the domestic sales were just above 6.3k in 2017 and 5.3k in 2016 achieving about 16% growth in domestic sales, projected to hit above 6.3k in 2018. This indicates that there is a demand in the local market of Cyprus. There is a clear indication that locals have returned to the market therefore, aiding the diversification of the market. Furthermore, the increased employment and job security combined with low inflation and low interest rates, have led Cypriots with high disposable income to play a major role in real-estate sales in recent years.
Interest from foreigners, and predominantly from non-EU buyers, continues to be a driving force for the market. Investors are attracted by Cyprus’ climate, along with relatively easy access to Europe and other destinations such as Russia and the Middle East. Its excellent road infrastructure and affordable living compared to Western European standards are also significant factors when evaluating a purchase of property. Other factors driving the demand for property by foreigners include the increasingly important role of safety and security benefits of the country. During 2017, a total of 2.4k properties were acquired by foreigners, whereas in the previous year a total of 1.8k overseas sales occurred. The highest share as regards to sale contracts filed by foreign buyers were in Paphos (36%), followed by Limassol (34%).
You might be thinking that we already know the future is bright, but what happens if the clouds roll in? Well, we already know that Cyprus has an open, free-market, with a good record of positive economic performance. Furthermore, its robust business environment, highly educated workforce and its favourable and stable tax regime have allowed the country to quickly overcome its financial crisis of 2013.
Looking positively ahead, ongoing procedures to reform public spending, accelerate initiatives to enhance incoming investment, a frontward push with our natural gas exploitation, and to reach full employment conditions by 2020- will therefore, contribute and further enhance the future of the country.
With the current real estate market at the recovery stage, its current stable economic indicators and its positive historical data in the real estate market, Cyprus demonstrates that it can continue its steady growth path and therefore, maintain its status as one of the growing eurozone economies. The increase of 20% in sales transactions and subsequently the healthy y-on-y 5% price increase, the absent of debt from the market and the lack of inventory further demonstrate the fact that the Cyprus real estate market currently sits on very stable and healthy foundations.
This is the time to invest in Cyprus’ real-estate!
