The International Monetary Fund (IMF) has released its ” Statement of the 2017 Article IV Mission “.
All indications portray a positive outlook for Cyprus and with GDP growth at 3.6% compared to the same period last year the IMF has made several recommendations to ensure the growth is sustainable. One recommendation is the re-introduction of the Immovable Property Tax ( IPT ).
‘Several investment incentives, including the citizenship-by-investment (CbI) scheme, provided welcome support to construction and the economy more broadly in the aftermath of the crisis, and construction of luxury residential and tourist properties—financed mainly by foreign equity—has been brisk.
However, this support has now achieved its goal, and could turn procyclical. Further decoupling the scheme’s eligibility requirements from real estate would help avoid excessive concentration of economic activity, and reduce the risk of over-supply of luxury properties. Procedures for issuing and transferring title deeds for new properties should be streamlined, with timely transfer of titles to buyers.
If signs emerge that construction in the luxury market is becoming reliant on domestic credit or activity is spilling over to other segments, tightening bank lending standards and raising macroprudential capital requirements would be appropriate. Reinstating the recently rescinded immovable property tax and raising transfer duty on immovable property would provide additional countercyclical tools.’