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A worrying future - Passports/Visas

22 January 2017

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What is interesting to note is that as a result of these high income/big spenders buyers, high cost cars are in high demand and some expensive makes have now a local shortage of supply with 4-6 months waiting list!! Similarly, and by projection, such passport buyers and in addition to cars, are high spenders in other goods with fashionable boutiques and others as well as restaurants taking their share.

We believe that the measure for permanent residency visas with the purchase of a residential unit not less than €300.000 and the acquisition of a Cypriot passport with the total investment of €2.0 mil. (including house purchase of not less than €500.000) has met with an unprecedented success. According to the Ministry of Interior, approximately €1.7 bil. have been collected through this measure (since 2013), a large amount, which has helped start up the building industry, the economy and the implementation of grand projects, such as marinas and golf projects, malls etc.

It is not a matter only of selling residential units, but, as more and more foreign (and affluent) people come to know Cyprus, so their time of stay will increase becoming long term tourists, whereas those with business inclination can venture in business investments (see 2 hotel developments by Chinese investors, the Ayia Napa marina to Arab etc etc), all as a result of the above measures.

The con jobs that form part of such sales, have been reported in this column two years ago, reported again recently (something which has prompted us to write to the Chinese ambassador). What is also of concern is that the new high rise and high cost residential projects that are undertaken along the Limassol coastal line with an average sales price of €8.000/sq.m. (off the beach) we are informed by the developers through announcements that “40% sold” etc. We estimate that approximately 150 units of such a value have been sold and because everybody wants to climb on the “golden train”, there are several other projects under design which will increase the number by another 250 units (targeting mainly the passport seekers). The worrying fact is that those who buy for passports are only restricted to keep the property for 3 years and we suspect that a good percentage of these purchasers are expected to sell their units thereafter. So, after the 3 year period, who is going to buy these existing and new coming units? One hopes that there will be taken, but will it be in the same numbers (?) (plus the other projects at the design stage, plus the marina, units, golf units etc etc). If this does not happen, it will cause a reduction in prices and an upset in the cashflow for those projects not in the market on time (and a worrying circumstance for the financiers as well). As we said, Limassol is the one area which we should keep our eye on, whereas another worrying development is the warning letter we have received from the E.U., that Cyprus should not lower the requirements and promote the measure to the extent it does. Although at this point of time we do not pay particular attention to this possible danger, it is something that we must bear in mind for the immediate future. What is also worrying, is the non workable law on the non payment of the common expenses, especially for such high cost units for which the common expenses could be considerable. It is one thing attracting the affluent buyers and another to keep them happy with E.U. standards of law and not our “cursed law” on common expenses, as we have here now. The situation is so sensitive that the Minister of Interior must enter into some sort of discussion for such matters now, the possible solution of the Cyprus political situation in addition (huge upset of the real estate, whereas the adoption of the same measure by the new T.C. state is another competition to note increasing the future uncertainty). If this situation if not managed correctly with the evident dangers, it will not become another real estate bubble which will burst.

Real estate development is one of the two major economy players for the Cyprus economy (tourism being the first) and although our “happy go lucky” approach and a “freewheel” direction, works well so far, but we must learn by our previous mistakes and look ahead so that surprises are not suddenly faced.

What is interesting to note is that as a result of these high income/big spenders buyers, high cost cars are in high demand and some expensive makes have now a local shortage of supply with 4-6 months waiting list!! Similarly, and by projection, such passport buyers and in addition to cars, are high spenders in other goods with fashionable boutiques and others as well as restaurants taking their share. To this end the success of the Limassol marina with all the beach/villa units sold and with an increase in their sales prices for those who want to sell by almost 30% within 3 months is a case in hand.

In ending we wish to mention that the multinational chain, McDonald’s, prices its Big-Mac based on the standard of living of each country. We say for Cyprus the “basis” should be the price of a take away souglakia (kebab) pitta which is on average €5-€6/each or in a restaurant say ±€15/each. Yet the other day in one of the high end fish taverns in Limassol old harbor, we had as a starter prawns (ordinary size) which was priced at €7.0/each prawn – our neighbor in the restaurant (Russian) ordered a plateful of them for his family for starters over 30 pieces (per waiter).

There you are then everything is so far okay and for us locals there are numerous alternatives, both for drink and food, which suit are pockets.

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