‘Business not as usual’
Political events towards the end of 2016 have brought about unprecedented uncertainty as we approach the property selling season of 2017.
Last year was positive for the Cyprus economy and the property market with a number of factors that enhanced Cyprus’ standing internationally and helped tourism and property sales.
- In March, Cyprus exited the European €10bn bail-out programme. This step marked a turnaround for Cyprus which in March 2013 was reeling from a toxic combination of broken banks, a soaring deficit and an inability to access market financing.
- International credit rating agencies such as Moody’s, S&P and Fitch continued to lift Cyprus’ Sovereign Rating throughout the year from a low in 2013 of Caa3 (Negative) to B1 (Positive) in November 2016. (Moody’s ratings)
- The Cyprus Government brought in measures which reduced property transfer fees by 50% and allowed the purchase of property during the period up to 31st December without having to pay capital gains tax when sold – at any time in the future. Whilst the second of these measures has ended, property transfer taxes remain at the reduced rate. In addition to the above home owners were notified that there would be a 75% reduction in Immovable Property Tax and that it would be abolished in 2017.
- The Citizenship and Permanent Residency schemes operated by the Government proved to be very popular for buyers with an enhancement to the Citizenship scheme offered midway through the year.
- The prospect of earnings being received in the future for the proven gas reserves off the Southern shores of Cyprus gathered pace throughout the year, culminating with the announcement in December of the preferred bidders for licenses in the third licensing round. The companies were ExxonMobil, Qatar Petroleum and ENI.
- The prospect of the reunification of Cyprus gathered momentum throughout the year with only a commitment to keep talking agreed by the end of it.
- Terrorist activity in countries that traditionally have competed with the Cyprus tourism industry helped to drive visitors here to produce a bumper year for tourism.
2016 saw increased activity over recent previous years and a slight increase in property prices. The most recent RICS Cyprus Property Prices Index available (Q3 2016) reports increases in almost all districts and property types. Compared to the 3rd quarter of 2015 apartment prices rose by 0.6% and house prices by 0.9%. Since RICS (Cyprus) launched its property price index in the fourth quarter of 2009 the value of residential apartments has fallen 39% while the value of residential houses has fallen 28%. Anecdotal evidence suggests that the value of holiday properties has fallen considerably more than those of residential properties.
All the above translated into a vibrant year for sales of off-plan and resale properties at Aphrodite Hills with British buyers holding their own against the Russians, Chinese and the re-emerging markets of Israel and the UAE. Properties sold across the spectrum of apartments to multi-million euro villas with the Russians buying the higher valued properties, particularly at Alexander Heights for citizenship reasons.
Brexit, the Sterling/Euro exchange rate and we believe, the Trump administration, sustain an uncertainty in the world and in particular amongst potential British overseas property buyers. With that in mind, we believe that there will be a slowing down in British interest for at least the first half of 2017. If the activation of article 50 by the end of March injects some clarity into Britain’s intentions and Europe’s reactions, we believe that we may see some improvement by the 3rd quarter 2017. In the meantime there are other markets to pursue including Russia, Israel, UAE, Jordan, Iran, Iraq and Lebanon. The Lebanese historically have settled in the Larnaca area with only a 20 minute flight from Beirut, but we did encourage some Lebanese to venture further West last year, at least to view an alternative to Larnaca.
A prediction for 2017 is extremely difficult. The Russian and emerging markets are far less vulnerable to the uncertainties brought about by Brexit and President Trump and given the positivity surrounding Cyprus we believe these markets may bring a successful year.