After the collapse of the United States housing market, EU taxpayers feared they would be expected to contribute towards the global financial crisis that was created.
Cyprus with its newly elected parliament had already started to face financial difficulties because of the poor investments of their major banks. In conjunction with the worldwide downturn of the financial markets, the Cypriot economy was in a tailspin. The real estate industry, which was in the midst of a boom, plummeted. Adding insult to injury, the Eurogroup pressed for an unprecedented solution. Allow the Cypriot banks to withhold a portion of depositor’s savings accounts. The citizens of Cyprus were outraged and took to the streets in protest.
The island of Cyprus has a key location in the eastern Mediterranean. It is a crossroad between Africa, Asia and Europe, which renders it as a business center characterized by a highly qualified workforce, a favorable tax environment, near perfect climate with sunshine to enjoy most of the year. It combines mountainous nature and the sea, quiet rural areas and cosmopolitan urban centers. Amenities and leisure facilities are easily accessible because of the short traveling distances. Cyprus has a very low crime rate, one tenth of other European countries. The excellent service, the extensive businesses and hospitable population have provided an affluent and comfortable life in Cyprus. This was all in jeopardy with the recent financial crisis.
Understanding Cyprus’ Current & Future State
As a result of the bailout plan, there is a cash injection into the economy. The new guidelines given to the banks by the Eurogroup, the unreliable mortgaged lenders will be pushed to settle their non-performing loans. Available properties in low prices will be on the market and investors will take advantage of these opportunities. Buying properties with the purpose of renting them to secure steady income. Prices will drop due to the number of properties built to satisfy the huge demand before the financial crisis.
Moreover, there is low liquidity in the market and the rise of unemployment for both locals and foreigners will be a factor where the latter mainly will no longer be able to rent, may even leave Cyprus, reducing even more the demand for properties. Until there will be an economic recovery the prices are estimated to continue to drop.
Nevertheless, when the interest rates become more favorable, as a result of the improvement of liquidity and the unemployment percentages drop, prices are expected to rise again. What will also contribute to that is the local and foreign investors’ interest, which will undoubtedly grow.
What is more, the materialization of the new government’s promises to open casinos and promote medical tourism will be a boost for the market and economy, as well as the natural gas terminal, which is under construction because of the country’s natural resources will both attract investment as well as contribute to bringing unemployment to a minimum.
Cyprus Moving Forward
We are confident that the change and strengthening of our economy and financial institutions will be swift. Cyprus has a history of overcoming many obstacles, we will add one more to our list.
By Georgia Socratous, Principal Broker, Cyprus Office