Cypriots invest in real estate (amongst other reasons) by tradition, from many years ago. To this end, the lack of alternative investments and the crush of the Cypriot stock market have helped towards this direction, as it has the constant and substantial capital gains. It is the target of every Cypriot to acquire his own home (now the percentage ownership is around 78%), his own holiday home (now the ownership ratio is around 25%) and his own office (now ownership ratio is around 15%).

The Cypriot, other than for his own use, directs his attention of real estate investment towards the following main sectors:

• Buying of land for future capital appreciation and resale. A trouble free investment requiring no management, with the expectation on to reap a very large capital profit. It does not produce income however and the investor must have also other sources of income – Approximately 27% of the Cypriot investors direct their attention towards to this.

• Buying of a building plot for resale or for future development or for dowry purposes. Approximately 13% of the Cypriot investors direct their attention towards this type of investment. This percentage is now reducing in favor of the field alternative, due to the high cost of building plots. It has the same advantages/disadvantages as the first option.

• Buying an apartment to rent. Approximately 20% direct their attention towards this alternative. This percentage is expected to be reducing over the next couple of years, due to the rise of the acquisition cost/prices of apartments, whereas rents have remained the same, reaching now yields of approximately 4% - It remains a popular type of investment, since it enjoys a capital appreciation and produces an income, hence an investor need not have all the money. Also due to the high cost of building plots/land for future housing development, a sector of the market buys apartments for future housing/dowry purposes.

• Offices - Despite the fact that high tech offices show a yield at present of around 6%, this is not a primary area of interest. Approximately 5% of the interest only is represented by this market source and this is much due to the demand circle that demand/prices for offices goes through from time to time – Similar advantages as for apartments.

• Shops - The shortage of good quality commercial accommodation has created yields, which at times reach 7%-8%. Touristic areas are more at danger of having ups and downs due to the fact that their value depends on the volume and quality of tourists at any year – Interest share is approximately 10% and this is due to their high cost.

Own users - Such as field used for weekend farming etc with not necessarily in mind their resale. Share of the market 5%.

• Business Investors – i.e. buyers from developers/contractor – share of the market 15%.

• Others – share 5%.

We must add here that the Cypriot demand in terms of value represents around 80% of the total market share. The remaining 20% is represented by the foreign market. This is a high percentage and for those areas that the foreigners are concentrated, they are the big players affecting the rate of sale/prices. As circumstances change, including the added request by the Cyprus Central Bank regarding own contribution in purchases (from the 20% to 40%) so demand and the analogy of the share in the investment changes.

Especially in the foreign demand the “buy to let” buyers are reducing, whereas the retirement/own use market, as well as the above average priced units, have not shown a considerable decline. Whatever the circumstances are, the Cyprus property market is most inelastic, with land/property owners rarely wishing to depart from their holding. Hence almost 30% of the development land is undeveloped, there is 6 times more supply of development areas than the population (the existing development zones can accommodate 4.2 mil. people – now we are 700.000) but yet prices go up and up.

An expensive but most profitable investment indeed, creating a lot of social side affects, including economic imbalances and frustration. It is for this reason that we have proposed the heavy taxation of undeveloped development land, in an effort to have development land released and thus keep prices at a rather constant level, plus the creation of availability.

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