Real Estate Outlook 2021: Focus shifting to new opportunities

Panos Danos
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Real Estate Outlook 2021: Focus shifting to new opportunities

The New Year has entered with a sense of optimism as vaccines are getting more widely available to the public by the day.

According to real estate professionals in Europe, 2021 is going to be a positive year for the real estate market with new opportunities for investments forecasting an explosion of pent-up demand for travel and leisure producing a period of “growth” which will accelerate in 2022.

It will take a little while for the vaccines to roll out and then somewhere around May, we are going to get a confluence of the vaccines getting to a certain critical mass and infection rates will begin to drop.

For 2020 as a whole, real estate prices, as well as the number of sales contracts, decreased in Cyprus, mainly because of the consequences of the pandemic that caused national lockdowns and movement restrictions worldwide.

In addition, the decision of the government to terminate the Cyprus Investment Program as from the 1 November 2020, has added to the level of uncertainty that conquered the real estate market, causing extreme pressure to high-end properties that were designed for and allocated to the investment program.

Despite fears that a number of units may remain unsold and that developments that have acquired permits will not materialize, there are projects that add significance to the depth and calibre of the Cyprus market.

Some of the biggest projects include the ‘City of Dreams Mediterranean Casino Resort’, CYCLOPS, Del Mar, Hadassah Hospital Centre, Invel projects, the Ayia Napa Marina, Larnaca Port and Marina, large golf resorts, the ‘TRILOGY’, ‘BLUE MARINE’ etc.

Looking ahead into 2021, it’s clear that affordability will be less than 2019 and this trend is expected to continue for some time.

There’s not going to be a widely available coronavirus vaccine for at least another four months, if not longer, according to health experts.

And given the recent surge of cases, there is a good chance non-essential retailer will be hit with added restrictions in the coming weeks that will impact their bottom lines.

Plus, many consumers are just plain afraid to shop in stores, and given the economic crisis, many also cannot afford to do so.

A sluggish holiday season could therefore pave the way to additional retail closings in the coming year.

All of this is particularly bad news for mall operators, who can’t afford to keep losing tenants – especially department store anchors.

It will be interesting to see if malls take a proactive approach to the ongoing crisis by expanding their tenant base in 2021 in an effort to get ahead of retail closures.

One area they might look to is healthcare — walk-in clinics and diagnostic centres.

It may be a little unconventional to sandwich a doctor’s office between a clothing store and an accessory shop, but if it brings in the revenue malls need, so be it.

Some real estate investors are going into 2021 with an optimistic approach about a speedy snap-back from the economic challenges related to the coronavirus pandemic.

Investment funds, which use leverage and employ more aggressive, often riskier strategies than other investors, predict that many undesirable sectors of 2020, ranging from energy to medical, assisted living, warehouses, logistics centres, composite real estate projects that include retail spaces, health centres and recreational areas, as well as old and obsolete buildings in town centres, will be the new areas of focus in the coming years.

However, the state and the banks must help small and medium enterprises by supporting wages for their employees and a new postponement of payment of taxes, contributions, and loans for extended periods.

Businesses have weathered many storms over the past years, displaying impressive levels of creativity and adaptability as they shifted to new operating models, distribution channels and technologies.

The challenges are not over, but their tenacity has helped sustain economic momentum and offers optimism for a recovery in 2021.

About the author

Panos Danos is the CEO of the DANOS Group.

Fall in property sales hits all market segments

Nigel Howarth
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Fall in property sales hits all market segments

The year-end fall in property sales we reported yesterday has affected all market segments according to official statistics published by the Department of Lands and Surveys.

Domestic sales

Property sales to the domestic market, which accounted for 66% of all sales in December, fell 11% compared to December 2019.

Although the number of sales recorded in Nicosia rose by 2%, they fell in the remaining four districts.

Sales in Limassol fell 25%, followed by Paphos (down 7%), Famagusta (down 4%) and Larnaca (down 3%).

Domestic Property Sale Contracts – 2019/2020 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2019 127 164 115 137 168 121 153 90 114 163 187 154
2020 178 155 124 29 83 167 230 143 174 190 196 157
Famagusta 2019 32 19 16 58 45 25 2 13 16 33 13 26
2020 10 18 16 6 8 43 29 9 30 58 30 25
Larnaca 2019 54 82 47 73 83 42 90 53 67 81 69 88
2020 76 64 56 13 28 71 72 51 75 101 82 85
Limassol 2019 166 152 192 291 329 138 177 134 176 144 210 212
2020 98 136 76 23 73 150 183 142 173 265 139 158
Paphos 2019 30 31 28 69 175 69 54 54 34 66 64 69
2020 55 29 26 21 31 18 42 17 74 84 24 64
Totals 2019 409 448 398 628 800 395 476 344 407 487 543 549
2020 417 402 298 92 223 449 556 362 526 698 471 489

(Note that some of these domestic sales may have resulted from properties acquired by banks as part of loan restructuring agreements, etc.)

Sales to EU citizens

Property sales to EU citizens, which accounted for 17% of all sales in December, fell 19% compared to December 2019.

Although sales in Nicosia rose 21% and sales in Limassol remained steady, they fell 48% in Nicosia, 25% in Paphos and 17% in Larnaca.

Foreign (EU) Property Sale Contracts – 2019/2020 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2019 14 14 9 19 20 16 13 5 8 10 15 14
2020 9 12 9 3 10 7 16 11 14 16 15 17
Famagusta 2019 9 6 14 17 10 8 17 14 10 5 9 23
2020 6 14 10 3 4 9 28 9 6 11 12 12
Larnaca 2019 12 12 21 18 20 11 16 13 6 23 14 23
2020 21 13 11 0 3 6 19 17 14 14 10 19
Limassol 2019 16 25 20 21 28 26 27 17 25 30 26 25
2020 28 30 11 12 14 15 28 12 39 33 28 25
Paphos 2019 56 72 61 48 69 59 73 58 61 95 61 72
2020 40 60 25 24 21 18 44 32 49 42 59 54
Totals 2019 107 129 125 123 147 120 146 107 110 133 125 157
2020 104 129 66 42 52 55 135 81 122 116 124 127

Property sales to non-EU citizens

Sales to non-EU citizens, which accounted for 16% of all sales in December, fell 41% compared to December 2019. With the exception of Famagusta, where sales rose 73%, they fell in the other four districts.

Sales in Nicosia fell 75%, followed by Paphos (down 62%), Larnaca (down 45%) and finally Limassol (down 28%.)

Foreign (Non-EU) Property Sale Contracts – 2019/2020 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2019 20 17 7 13 25 8 8 8 15 10 6 12
2020 10 11 6 6 7 4 5 3 7 21 6 3
Famagusta 2019 12 23 15 21 32 10 30 3 14 12 26 15
2020 34 15 15 1 16 4 3 21 23 11 9 26
Larnaca 2019 48 31 50 49 70 49 51 27 29 56 39 51
2020 50 41 39 11 28 32 40 19 28 38 21 28
Limassol 2019 69 79 75 116 189 55 82 45 39 54 60 47
2020 54 59 56 37 25 37 43 39 41 104 60 34
Paphos 2019 101 108 96 107 160 77 103 54 78 61 108 79
2020 73 82 30 27 68 65 43 36 39 76 32 30
Totals 2019 250 257 243 306 476 199 274 137 175 193 239 204
2020 221 208 146 82 144 142 134 118 138 250 128 121

Analysis of property sales since 2000

Cyprus property sales

Property sales fall at year end

Nigel Howarth
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Property sales fall at year end

Cyprus ended the year with property sales falling by 19 per cent in December compared with December 2019 following the abandonment of the Citizen-by-Investment (aka Golden Passport) Scheme in early November.

During the month a total of 737 contracts for the sale of property were deposited at Land Registry offices across the island compared to 910 in December 2019 according to the Department of Lands and Surveys.

Sales fell in all districts with the hardest hit being the two districts most popular with overseas investors; Paphos, where sales fell 33% and Limassol, where they fell by 24%. Meanwhile, sales in Larnaca fell by 19% and sales in both Famagusta and Nicosia fell by 2%.

Total Property Sale Contracts – 2019/2020 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2019 161 194 131 169 213 145 174 103 137 183 208 180
2020 197 178 139 38 100 178 251 157 195 227 217 177
Famagusta 2019 53 48 45 96 87 43 49 30 40 50 48 64
2020 50 47 41 10 28 56 60 39 59 80 51 63
Larnaca 2019 114 125 118 140 173 102 157 93 102 160 122 162
2020 147 118 106 24 59 109 131 87 117 153 113 132
Limassol 2019 251 256 287 428 546 219 286 196 240 228 296 284
2020 180 225 143 72 112 202 254 193 253 402 227 217
Paphos 2019 187 211 185 224 404 205 230 166 173 192 233 220
2020 168 171 81 72 120 101 129 85 162 202 115 148
Totals 2019 766 834 766 1057 1423 714 896 588 662 813 907 910
2020 742 739 510 216 419 646 825 561 786 1,064 723 737

Annual property sales

The total number of property sales in 2020 fell 23% compared to 2019 with Nicosia being the only district where sales actually rose (by 3%.)

Sales in Paphos fell 41% and sales in Limassol fell 29%, while sales in Larnaca and Famagusta fell by 17% and 11% respectively.

During 2020, Limassol reported the highest number of property sales (2480) followed by Nicosia (2054), Paphos (1554), Larnaca (1296) and finally Famagusta (584).

Cyprus property sales 2019 2020

The Department of Lands and Surveys has yet to publish a breakdown of the figures showing domestic and foreign sales. We’ll bring you the figures as soon as they’re published.

Lax oversight let alleged cheats get Cyprus passport

Associated Press
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Lax oversight let alleged cheats get Cyprus passport

NICOSIA, Cyprus – Authorities in Cyprus should consider stripping citizenship from a dozen individuals over their alleged involvement in acts of theft and fraud, according to the findings of a probe into 42 foreign nationals who obtained a Cypriot passport in exchange for millions in investments.

A redacted, 53-page report from the review of the country’s now-defunct citizenship-for-investment program was published Tuesday. The government released the report compiled by a three-member committee in what it said was a demonstration of its commitment to transparency and amid strong opposition criticism that it was trying to sweep the matter under the carpet.

Along with those facing the loss of Cypriot citizenship, another five individuals could face charges for allegedly lying on their applications, the report said.

The report detailed how lax vetting procedures allowed some investors to submit incomplete applications or to provide false information. It also illustrated that some “promoters'”- law firms, accountants and other companies that prepared applications for their clients – apparently broke the rules because of a lack of oversight.

According to the report, one investor used two different names and had tried to open bank accounts with each of them Another investor paid over 3.2 million euros ($3.9 million) to obtain citizenship in 25 credit card instalments inside of 30 minutes without raising any red flags.

The report faulted the Cypriot Interior Ministry for acting as a “filing office” for passport applications without properly checking on applicants’ backgrounds or the sources of their money. In one instance, the ministry failed to inform the Cabinet – which had final say on the applications of investors-about media reports saying that one investor was embroiled in a financial scandal involving a trust fund.

The citizenship-for-investment program started in 2007 but ramped up after 2013, when a financial crisis nearly drove Cyprus into bankruptcy. Investors needed to pour at least 2.5 million euros ($3 million) into companies and property to obtain citizenship. The program raised more 7 billion euros ($8.57 billion) until the government scrapped it on Nov. 1.

The cancellation came following an undercover news report that allegedly caught on video the parliament speaker and another long-serving lawmaker promising to help circumvent the rules for a fictitious Chinese investor with a supposed criminal conviction. The two legislators have since resigned.

In October, the European Union’s executive arm launched infringement procedures against Cyprus and Malta, which has a similar program for big investors, saying the arrangements violated the bloc’s treaties and undermined “the essence of EU citizenship.”

The report was based on reviews of a dozen files pertaining to applications from 42 investors and their families during 2008-2018. Identifying information about the investors was redacted, but the government promised to release the full report after criminal investigations into the program are completed.

A wider, more in-depth probe ordered by the Mediterranean island nation’s attorney general involves the applications of more than 6,000 investors and their relatives who received a Cyprus passport since 2013.

© copyright 2020 The Associated Press

Small drop in non-performing loans

Cyprus News Agency
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Small drop in non-performing loans

Cyprus’ non-performing loans (NPLs) recorded a small decrease by €13.5 million, totalling €6.52 billion at the end of August, according to the latest data from the Central Bank of Cyprus (CBC).

According to the data, as a percentage of total loans, NPLs amounted to 21.9%, with the NPL index remaining unchanged compared to the previous month. From the end of December 2019, the total NPLs showed a decrease of €2.4 billion, which is mainly attributed to the sale of a bad loan portfolio by the Bank of Cyprus (also known as Helix 2) as well as to NPLs write-offs by the Hellenic Bank.

Due to COVID-19 disruption there’s a moratorium of loan repayments in the country from March 2020 to December 2020, while according to instructions of the European Banking Authority (EBA), these loans are not classified as non-performing loans.

Total NPLs (under the EBA directive) at the end of August amounted to €6,517 million compared to €6,530 million last month. The decrease is mainly attributed to the transfer of restructured loans, amounting to €13.56 million in the portfolio of serviced loans, after the completion of their monitoring period under the EBA directive.

Loans with arrears of more than 90 days amounted to €5.44 billion or 18.2% of total loans in August, showing a decrease of €19.8 million compared to the previous month.

Total restructured loans at the end of August amounted to €4.19 billion, of which €3.02 continue to be classified as NPLs.

In addition, total accumulated provisions amounted to €3.63 billion in August, of which €3.47 billion for NPLs, compared to €3.62 billion and €3.46 respectively in the previous month.

Total loans at the end of August, amounted to €29.81 billion of which €15.14 billion, or 53.13% concerned businesses and €12 billion concerned household loans.

Bad corporate loans at the end of August amounted to €2.87 billion, of which the vast majority, (€2.43 billion) concerned SMEs of small and medium enterprises, while household NPLs amounted to €3.3 billion or 27.5%.

(Cyprus News Agency)

Our top 10 property stories in 2020

Nigel Howarth
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Our top 10 property stories in 2020

Our top 10 property stories for 2020 are set against a background of the COVID-19 pandemic, which has plunged our planet into a health and humanitarian crisis, resulting in disruptions to businesses and livelihoods, and restrictions on our personal freedoms.

Cyprus Property News has not been immune to the impact of the pandemic. Our visitor numbers have fallen to just over 500,000; a 30% fall compared to last year.

As we approach the festive season, which will be unlike any we’ve experienced in the past, here are the top 10 stories that have attracted the most interest from you, our readers, over the past 12 months:

Number 1: Historic collapse of property sales – News that the COVID-19 pandemic had put the island’s real estate market into deep freeze, with the number of sales falling by 80% in April compared to April 2019.

By the end of November sales had recovered and are now down 24% compared to last year.

Number 2: Cyprus sold passports to criminals and fugitives – A report that Al Jazeera’s Investigative Unit had obtained more than 1,400 approved Cypriot passport applications, some of which showed passports were sold to criminals and fugitives.

A few days later the Interior Minister called Al Jazeera’s ‘probe’ a smear campaign, implying that the ‘old enemy’ Turkey was involved in an attempt to wrongly discredit Cyprus.

Following further reports and a damning video by Al Jazeera, two very senior politicians were forced to resign, Cyprus’ “Golden Passport” scheme was terminated, a police investigation was launched and the European Commission launched infringement procedures against Cyprus regarding its “Golden Passport” scheme.

Number 3: The Cyprus property market will rebound in 2021 – A prediction by Panos Danos, the CEO of Danos/BNP Paribas Real Estate, that island’s real estate market will bounce back in 2021.

His prediction came in April, long before Cyprus’ “Golden Passport” scheme was terminated.

We’ll find out next year whether Mr Danos’ prediction is correct.

Number 4: Corrupt lawyers continue to plunder estates – Despite the abolition of the Cyprus Bar Association’s ‘Minimum Fee Regulations’ in 2018 following a successful complaint to the European Commission, I received several reports from co-executors and beneficiaries of deceased family members the lawyers were still charging the deceased’s estate based on the abolished regulations.

Further developments aimed at totally abolishing this illegal practice are expected in 2021.

Number 5: Foreign property sales take a big hit – The lockdown measures introduced to help combat the COVID-19 pandemic also hit the overseas market hard in April with sales falling 71% compared to the April 2019.

By the end of November sales to the overseas market had recovered and are now down 34% compared to last year.

Number 6: Cyprus house price index falls 2.9 per cent – News from the Cyprus Statistical Service (CySTAT) in October that house prices rose 0.3% in the third quarter of 2020 compared with the second quarter, but fell by 2.9% on an annual basis.

However, the RICS Cyprus assessment of residential houses and apartments values reported they fell during the second quarter of 2020 compared to the previous quarter but rose on an annual basis.

However, the Central Bank of Cyprus “Residential Property Price Index” (RPPI) for the second quarter of 2020 reported a rise in both quarterly and annual prices.

The jury’s still out on which one is correct.

Number 7: 30-year Paphos marina saga continues – News that the Ministry of Tourism that the process to secure the services of a consultant to examine the proposal of establishing a combined marina and cruise ship docking facility in Kissonerga in Paphos.

The Paphos marina, which has been stalled by bureaucracy and legal battles for more than 30 years, is unlikely to get off the ground for many years.

Number 8: Property sales collapse hits all markets – News that the collapse in sales in April, due to the COVID-19 pandemic, has affected all markets, with sales to the domestic market falling 85% and sales to the overseas market falling by 71% compared to April 2019.

At the time, Panos Danos said “The effects of the pandemic on Cyprus real estate are intensifying” noting that “Demand from abroad, which has led to a market recovery in recent years, primarily in Limassol and Paphos, is now almost non-existent.”

Number 9: Guide to residency in Cyprus – A message from the British High Commission in Nicosia advising all Britons living in Cyprus that a brown residency booklet, a blue slip, a pink slip, an ARC, an old residency stamp in a UK passport issued before 2004 are outdated and no longer valid.

All Britons wishing to remain in Cyprus must apply for an appropriate MEU residency document if they wish to remain in Cyprus after the end of this year.

Number 10: Upward trend in property price index slows – A report from the Cyprus News Agency advising that although property prices were rising, the pace of the rise had slowed.

The Cyprus Central Bank attributed the slowdown to the reduced demand from foreign investors due to stricter provisions introduced to the Cyprus Investment Programme (which was subsequently terminated following the Al Jazeera Investigative Unit report.)

Music video of the year

As regular readers may have noticed, I gave Cyprus Property News a new coat of paint during lockdown and I hope you enjoy the new look.

This year I’ve chosen a video of “Ride of the Valkyries”, one of the most famous scenes from Wagner’s Die Walkure.

May I take this opportunity to wish you all a Merry Christmas and a
Happy and Healthy 2021 free of COVID-19

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