The Impact Of Covid-19 To The Cypriot Real Estate Market

  • 4 years ago
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Supply side in recent years saw an increasing pipeline of high-priced residences come to the market with values derived primarily from the Passport Scheme benefits rather than any Real Economy market drivers. The main bulk of buyers for these passport properties have been Russian and Chinese citizens but demand has waned increasingly over the last 12 months. Chinese activity has been almost absent from the market since the onset of COVID19 in Dec 2019 introduced severe restrictions for potential buyers to travel to the island and made it impossible for many to send funds to complete purchases.

The new reality since the lockdown in Cyprus is that all sectors of the real estate market have come to a standstill and many transactions already agreed in principle or even midway through have been frozen or postponed.

Many developers with their finger on the pulse had been scaling down activity during 2019 but many others who got late into the development of residences for passports (particularly multi-unit towers) have a large stock of unsold units. Developers are now planning to change use from residential to office or hotel accommodation which they hope will be in greater demand when the market starts to move again.

With construction now at a standstill there are a multitude of projects that are unfinished. The prominent marina, casinos and Larnaca port projects will all suffer in the short-medium term. This can only mean a softening of pricing through the market, but quite how low prices will fall remains to be seen.  One thing is certain – the task of valuing a property just got much, much harder.

The Retail sector will be hit most both in terms of a halt in the expansion plans of the Retailers as well as reduction in rental values imposed by the Government to help the Retail Sector survive after the lock down and loss of considerable income.

The Residential market will also bear the impact of the lockdown since Foreign Investors will be reluctant to invest in foreign markets due to the general insecurity and problems in their home countries as well as the revision of the Investment Plans (for Cyprus, foreigners accounted for the 50% of the buyers in many cases). Limited demand on behalf of Cypriot buyers due to the rise of unemployment and the reduction in banking financing through loans will also lead to a pressure on prices. The Interest in The big Marina projects will be influenced and it will take a while to regear the investment programs and communicate it. I believe 2020 and 2021 will be two difficult years and the government will need to step in and create the “investment environment “to bring back the interest on the Cyprus Market.

The Russians, the Chinese and the Israeli demand will be on hold at least for 2020. The loss in demand for airbnb will bring a reduction both in sale and rental values. The rate of the reduction in prices will be based as to when the demand will start again and what incentives the Cyprus Government will be willing to give.

The Office market is a big question since this lockdown created a new “working from home” trend and companies saw that employees productivity can be at the same level and even higher from home. This will lead Organizations to reconsider their plans for new offices.

Logistics, Warehouses and Industrial are benefited from this crisis due to the massive increase of e commerce.

The real estate market (which is always a good investment market to have in mind) is expected to rebound in 2021.

Panos Danos BSc, FRICS, C. Env., VRS, IPF
CEO of DANOS An Alliance of BNP Paribas Real Estate,
member of the Cyprus Valuers board of directors

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