The property market in Cyprus is entering into a recession for the first time since before the 2013 economic crisis, which led to the bailout of the eastern Mediterranean island, a leading property developer said here on Friday.
He cited the outbreak of COVID-19 as one of the main reasons.
Petros Lazarou, chief executive officer (CEO) of the G&P Lazarou estate agency, was quoted by the StockwatchCy economic news outlet as saying that several other reasons are also conducive to the property slump.
“We have the coronavirus situation, stricter conditions for obtaining a Cypriot passport, which turns investors to other countries, a lot of properties for sale and excessively strict criteria set by banks on new loans to households,” Lazarou said.
He added that a search of the banks’ websites will show high availability of properties that the banks had obtained in exchange for non-performing loans — a legacy of the 2013 economic crisis.
“I am wondering who will buy all these properties,” he said.
The latest economic report on Cyprus by the European Commission said that the increase in property sales in the country slowed down to just 0.7 percent in the second half of 2019, compared with two-digit growth in the first half of the same year.
Lazarou said that the COVID-19 outbreak in China will inevitably lead to a reduction in interest by Chinese investors, who made up the second largest group of property buyers in Cyprus after the Russians.
“We had a few Lebanese investors, but now they cannot take their money out of their country as a result of recent restrictions,” he said.
Property purchases in excess of six billion euros (6.6 billion U.S. dollars) by mostly Russian and Chinese investors helped the Cypriot economy recover from a near meltdown in 2013.
Lazarou said that the only factor keeping the property market going is the zero and negative interest rates on bank deposits, which drive people with surplus money to invest in real estate.
Another property developer, Costas Kadis, was quoted by StockwatchCy as saying that real estate agencies are now turning to other sources for clients beyond China.
But he noted that a handicap real estate agents are faced with is stricter conditions imposed by new Cypriot legislation on the issuing of passports to investors.
Cypriot Interior Minister Nikos Nouris, pressed by opposition politicians to slow down the “citizenship by investment” program, told lawmakers earlier this week that the responsible department has stopped considering passport applications submitted after Jan. 31 until they clear the backlog of applications and until new regulations are passed by parliament.