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16 September, 2020

Cyprus economy will recover, property prices are expected to rise

The economy of Cyprus is recovering steadily. The international rating agency Standard & Poor's (S&P) forecasts 5.5% GDP growth in 2021. Pre-crisis indicators will not be reached until 2022.

The Economy of Cyprus: Forecasts 2020-2022
Photo: Adobe Stock

In their latest report, S&P experts assigned Cyprus the sovereign credit rating of BBB-/A-3. This sufficiently high rating is evidence of the stability of the economy and the satisfactory solvency of the state.

What was the forecast of the European Central Bank in spring 2020

In April 2020, European Central Bank President Christine Lagarde projected a 5-12% decline in EU GDP for 2020. Today, S&P expects Cyprus to have a GDP deficit of 4.6%. 

The Government of Cyprus was able to contain the decline in GDP through effective measures. In particular, construction companies resumed operations in May 2020.

Experts from S&P say that the Cyprus economy will show a steady growth trend by the end of 2020. They predict that the country's economic situation will fully recover by the end of 2022.

Growth in economic indicators will also affect the interest of foreign investors who are planning to buy property in Cyprus. In particular, we are talking about participants in the citizenship programme for investments. After all, along with economic recovery will increase property prices.

Situation on the real estate market in 2020

The Cyprus real estate market experienced its first changes due to the crisis in March 2020.

The number of real estate transactions fell by 33% compared to March 2019. Limassol and Paphos had the lowest number of deals. In these resort towns there were twice as few sale and purchase agreements concluded as in March last year.

Between January and July 2020, the number of non-EU Cyprus property sales to foreign investors decreased by 46% compared to the same period in 2019. At the same time, the total number of purchase and sale contracts concluded with foreigners decreased by 43% over the same period.

The decline in demand for real estate is due to closed borders and the financial crisis. Buyers, including applicants under the Citizenship for Investment programme, could not come to the country to choose a property to buy.

The option of buying real estate remains the most popular among the programme participants. Between 2013 and 2018, 55% of all investors who participated in the Citizenship for Investment programme received a Cyprus passport through the purchase of real estate.

Real estate market and Cyprus citizenship programme in 2020

Another reason for the outflow of foreign buyers is the change in the Cyprus citizenship programme for investments. It took several months to consider the amendments to the citizenship programme. As a result, many investors were waiting to accept them before buying property to participate in the programme.

A sharp drop in real estate transactions occurred in Limassol, Paphos and Nicosia and resulted in temporary price reductions. It is therefore beneficial for investors who are now planning to participate in the Cyprus citizenship programme to buy property in these cities.

Earlier we said that Cyprus was ranked 1st on the list of countries that Russians most often indicate as a tax residence country. The reason for this is low tax rates: for example, VAT is 19%. This is a low rate compared to other EU countries, and you can take advantage of the benefits.

Under certain conditions, VAT on purchases of new properties will be only 5%. In transactions with secondary real estate, there is only 4% tax on the transfer of ownership, while there is no VAT.

Cyprus also took 3rd place in the ranking of countries where Russians opened accounts most often in 2019.

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Cyprus economy will recover, property prices are expected to rise