Real estate has always been the backbone of any major investment in the country’s economic activity and with approximately 75% of the population owning their own home and 53% of Cypriots investing in real estate; the importance of the latter to the Cypriot economy is evident. This, coupled with the reduction of the island’s territory by approximately 40% due to the 1974 Turkish invasion, has increased the importance of real estate, with an analogous effect on the demand for, and value of property. Over the last 20 years local real estate has showed a steady and somewhat sharp capital appreciation at an average rate of 8%-15% (the higher rate for the seaside resort areas) until 1995. Since then, and up to April 1999, the market became very slow and prices for some property (mainly agricultural land and offices) even showed signs of a fall, at the rate of 10% on average, from the 1995 price levels.

The reasons for this unprecedented reaction of the market were the downturn of the tourist industry but primarily the political situation. The return of tourist demand in 1998 and the calm political situation that has prevailed since March 1999, but more importantly the Helsinki agreement, which has set Greco-Turkish relations on a new course, has had a most positive effect on demand in the local real estate market. At the same time foreign demand, in the form of acquisition of holiday-retirement homes has also shown a sharp increase with a positive effect on prices these positive trends (tourism – improving economic situation – calm political situation – increased foreign demand etc) are expected to continue over the next few years with the property market fully reactivated and reaching its pre-1995 levels by mid-2001. It is anticipated that demand will be primarily for offices, detached houses, choice commercial plots, speculative building land and seaside land/property.

 We feel that the indiscriminate property investments, which existed before, will not be repeated over the next few years. Agricultural land and land with long term potential for capital growth will not be a priority for investors nor will apartments for rent and purchasing of ordinary residential building plots and holding them “for a future” sale for capital gains purposes. At the same time, commercial building plots will be in greater demand, with their prices shooting up (since the limitations imposed on commercial development in 1990, the shortage of commercial plots has created a kind of scarcity value).

The fast changing and improving economic situation may be illustrated by the following examples:

A building plot in Nicosia, on the market for 2 years and with an asking price of CY 800 000 was sold this year for CY 1 200 000

2.     An office building under development on the Limassol road (in Nicosia) with an asking price of     CY 1 750 000 was sold for CY 1 950 000 to a keen purchaser who wanted to outbid another two interested parties and actually offered more than the developer’s asking price!

3.     Of two similar building plots at Makedonitissa, one was sold 6 months ago for CY 300 000 while the other was sold last week for CY380 000

4.     A commercial site opposite the old GSP stadium was sold within a day of being placed on the market for CY 620 000

5.     Four detached houses with an average price of CY 250 000 – 300 000, unsold for 18 months, were all sold this year

6.     Seaside plots at Protaras were sold at CY 2 000 000 each after keen competition from two would-be public (hotel) companies

7.     A Paphos beach site, sold by a bank for CY 3 500 000 was resold the same week for 4 200 000 in the form of shares (with guarantee value) to a would – be public (hotel) company

8.     Beach land at Paphos sold for CY 200 000 p.d. (the highest price ever) to a would-be public hotel company.

9.     A factory at Strovolos sold by a bank after a two year waiting period with an asking price of  CY 380 000 went for CY 485 000 at public auction.

Things are certainly changing at a fast rate with the emphasis on upmarket property, commercial sites, high priced beach villas, expensive houses etc. This state of affairs is primarily evident in Nicosia where we would guess that 90% of residential/commercial activity takes place while 60% of tourist land purchasers are in Pafos district, 30% in Paralimni/Protaras and 10% in Limassol. It is evident that prices will increase very sharply, now, especially in Pafos district where large investment funds by the Leptos and Aristo groups may find themselves competing, thus pushing values upwards at very fast rates. At the same time, it is noticeable that ordinary houses/flats/building plots, units that are directed more towards the average/lower income groups, have not altered in value or demand. Although the situation here is improving slightly, it is nothing near the upmarket improvement. This new change to the economic structure of the country looks bound to produce a new generation of investors and a new generation wealthy class, whereas others may find that their hard earned past deposits are lost.

 All in all, we are confident that the first years of the new Millennium promise a positive future for the local property investor.