I have been arranging mortgages for properties in Southern Cyprus for years, but recently the country has hit the headlines for all the wrong reasons. Expats have been worried about their properties, their savings and their pensions set against the context of near bankruptcy for the island.
Southern Cyprus last month agreed a €10bn (£8.4bn) bailout deal from the European Union and International Monetary Fund. However, it is running out of cash and faces a budget shortfall of at least €75m (£63.9m), the country’s accountant general has recently said.
Some people who have bought in Southern Cyprus for retirement are now in negative equity, so does this mean that the country is now off-limits for overseas buyers?
In my opinion, Southern Cyprus should now be firmly considered a ‘lifestyle’ purchase and not an investment. Although it is still too early to assess the full impact on the property market, it is clear that immediate interest in property has dropped. However, the main attraction to Southern Cyprus has always been the lifestyle that the island offers and this will never change. It will therefore still be popular for holidays and retirement in the long-term.
With Southern Cyprus still offering a low cost option for residency to non-EU persons, this has kept a steady flow of sales, especially from the Chinese market. This is helping to maintain the current property prices, especially around the €300,000 mark.
Now that the Laiki bank will officially be wound down, one might be forgiven for thinking that the lender will now be looking to liquidate its bad portfolio of loans, which will inevitably see cheaper properties on the market. This will not be the case at present.
The government is looking at methods to force interest rates down and extend the loans to help debtors re-start their loan repayments. Of course, at some stage the lender will be forced to repossess properties that cannot be repaid in the future.
There could be opportunities for people in the UK to buy ‘cheap’ if people in Southern Cyprus sell up and go back to their home country, although I would strongly recommend that independent valuations and legal checks be undertaken before purchasing.
There are still concerns regarding title issues so legal advice should be taken. I’ve written tips for purchasing in Southern Cyprus here: http://www.simonconn.com/cyprus/
Generally Southern Cyprus is still a great place to purchase property, but property in sunny holiday destinations are not always the best investments.
Property in Southern Cyprus will not currently provide long-term gains and rental yields, unless the property is unique.
I am sure, now that the banks are solvent and with interest rates hopefully coming down in line with other EU countries, it will become much easier to invest in property here.