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September, 18 2019
September, 12 2019
Interview with the lawyer Alex Danos regarding the real estate sector in Cyprus 2018
MR. ALEX DANOS, LAWYER @ Danos & Associates LLC answers at our questions about the real estate sector in Cyprus today and its impact to the economy overall, the benefits of buying a property in Cyprus, the recent legal amendments and much more.
- The real estate sector has been through a turbulent phase after the recession of 2013. How would you describe the situation today?
Indeed, the real estate sector has been through hardship after the recession of 2013 but things have changed over the last 2 years or so. The economy is improving and this has a direct impact on real estate. Numbers from the Land Registry but also our own experience through our clientele and speaking with estate agents and property developers, suggest that prices of real estate are now going up and demand has significantly increased for both buying and renting property. I would say that the current situation is very encouraging and my prediction is that prices of real estate will continue to increase and buyers both local and foreign are now more willing to invest in real estate.
- What are the benefits of buying a property in Cyprus especially for foreign investors?
Cyprus is a safe country with a sound legal system and professionals of high level (such as lawyers and accountants). Further, besides the obvious attractions of nice weather and beautiful beaches, many foreign investors are motivated to invest because of the incentives of our Immigration programs. An investment of 300.000 Euros on real estate, under certain conditions, can qualify the investor to apply for permanent residence in Cyprus. This is a program particularly popular with Chinese, Russian, Ukrainian and Middle Eastern investors.
Furthermore, Cyprus offers a citizenship program and one of the options of investment is real estate. The required investment is a minimum of 2 Million Euros. Moreover, there are also several tax incentives for investing in real estate in Cyprus.
- How is the behavior of the high-end residential property buyers?
High-end residential property buyers are often non-EU citizens investing in Cyprus in order to obtain the citizenship which is an EU citizenship. They generally prefer seaside towns with Limassol being particularly popular.
- The real estate sector had a domino effect on other fields in the past. How are the other fields such as banking and employment fields getting affected this time when Cyprus real estate apparently is bouncing back to boom time?
I am not an economic expert but my understanding and opinion is that the economy is overall improving. In regards to banking, I think difficult times are ahead due to the banks becoming increasingly bureaucratic and difficult for opening new bank accounts or updating information for existing ones. Banks are under a lot of pressure and constraints which I believe are counterproductive in regards to the overall efficiency of Cyprus as a financial center.
- The transaction volume in terms of sales contracts has increased dramatically across Cyprus the latest period, are we in danger of getting into a new economic bubble?
I don’t think so. I think prices are being ‘corrected’. Prices fell very significantly before and after 2013 and now they are returning to healthy levels. Having said that, I think in Limassol there is a certain risk of a bubble as prices seem to not reflect real economy and are largely pushed high due to foreign investors and not so much due to local buyers.
- Buying a property in Cyprus seems to be closely related to the ease of getting a banking loan at least for some individuals. How would you describe the banking procedures overall today?
Increasingly difficult. Most employees of banks ended up spending most of their time on due diligence and not on actually serving their customers or trying to attract new customers. It can be frustrating for customers and even for bank employees. There were definitely serious issues with the way banks functioned before the crisis but I think now we are reaching the other extreme.
- How will the dissolution of the Cooperative Central Bank of Cyprus affect the real estate sector and the economy in general?
I don’t think the dissolution of the bank will have a direct link to real estate performance. In regards to how it might affect economy overall, it is difficult to say but I do not expect a very significant negative impact.
- How can a legal advisor assist a foreign investor in buying a property in Cyprus? In which procedures are lawyers crucial?
A lawyer can help a buyer whether foreign or local by conducting all relevant due diligence such as drafting or reviewing contract of sale, making sure property does not have any encumbrances such as a memo etc. and making sure that the client will get good title deeds. It is advisable to use a lawyer for such property transactions and to avoid future legal trouble.
- How are the changes to the law regarding the title deeds, immovable property tax and property transfer fees affecting prospective buyers?
Prospective buyers want to know about all relevant information such as taxes, legal issues with title deeds etc. For example, the government had recently given a certain chronological period whereby any buyer of real estate would not pay capital gains tax if the property was sold in the future. Such tax incentives attract investors. Transfer fees being reduced to half was also another good incentive for buyers.
Legal issues such as problems with title deeds are a concern for investors although recent legislation has made things simpler. Any potential buyer wants to know the advantages and disadvantages of investing in a country, associated fees, potential legal issues, etc.
- We also see an increase in tourism related real estate and infrastructure investments the past years. Is this phase just transient or will this booming period continue and if yes which factors are required to support progress and growth in Cyprus?
I hope it will continue but I cannot predict the future and there are too many factors that affect an economy. To continue having growth we must remain a flexible and pro-business economy. Tax incentives and new initiatives such as Immigration programs, incentives for start-up companies etc are essential for a small island that relies heavily on its relationship with tourists and foreign investors.
Mr. Alex Danos is the managing partner of of the legal firm Danos & Associates based in Nicosia and with affiliates in Greece, Belarus, China, Russia, Ukraine. For further information about the legal firm click here.