A two-pillar solution to stop the ever-increasing rents
There has been a change of pace in the real estate sector in Limassol. The increased demand from the local market for residential development lately, is slowly turning the interest of property developers towards the construction of more affordable real estate, largely setting aside the creation of high-end developments.
Analysing the current trends in the real estate sector, before the second Limassol Business and Investment Summit which took place at the Parklane Luxury Resort in Limassol late last month, the Founding Director of Imperio and Deputy Chairman of the Land and Building Developers of Cyprus, Yiannis Misirlis, noted that the pandemic period and recent developments regarding the war in Ukraine have stimulated demand for more affordable real estate, while at the same time, the interest in high-end residential real estate remains stable.
“The arrival of many foreigners – professionals and non-professionals – in Limassol, combined with the improved purchasing power of the locals and the attractive, due to low interest rates, financing programmes offered by local banking institutions, have created a significant demand for real estate aimed at the average buyer”, Mr Misirlis notably stated.
Commenting on the fact that Cypriot real estate in previous years had focused exclusively on the creation of luxury real estate, Mr Misirlis explained that in the period following the 2013 banking crisis, many potential buyers were forced to revise their plans and turned into tenants. The demand from locals for the purchase of real estate had, then, sharply decreased, thus turning the interest of property developers to foreign markets.
This development, added Mr Misirlis, left the local market unexploited. “We have left behind a big gap, to which little by little some companies in the sector have lately turned their interest again”, stressed Mr Misirlis. He added, “Imperio is one of the first companies to refocus on this part of the market, hence, this month the first phase of our residential development Sunset Gardens in western Limassol is delivered, a gated community with more than 320 apartments addressed to this buyer category”.
Two-pillar solution for high rents
Imperio’s director also referred to the rental market, confirming that at this time the rent is at the highest levels in recent years. As he explained, rents in Cyprus were already high, due to the reduced supply of suitable real estate. However, he added, the phenomenon has intensified recently due to the relocation of many foreigners (Ukrainians and Russians due to the war, and others) to Cyprus, especially in Limassol, and on the other hand the preference of many Millennials, who are the youngest group of tenants, to remain for a much longer period of time as renters.
Conveying his position regarding the appropriate way to stop the phenomenon, Mr Misirlis opposed the suggestion of some groups to set rent controls since, as he stressed, such a thing would create two-speed properties, while putting an end to any plans of owners for renovations and improvement works. “This would certainly deter future investments in the real estate market, since returns would be capped”.
The director of Imperio expressed the view that in order to solve the problem, the state should give the appropriate incentives, which will encourage the private sector (private investors) to invest in more real estate, for which there is a strong demand, such as apartments, with the commitment that they will be available for rent for a specific period of time, such as 10 years. Similar tax breaks are offered in many European countries.
At the same time, with the aim of reducing the demand for rents, Mr Misirlis suggests the introduction of help-to-buy plans, in order to encourage current tenants to buy their own property. “The goal should be to give tenants the opportunity to buy their own property, hence turning them into landlords. Such programmes are working successfully in several European countries, such as Germany and the United Kingdom, and it would be, I think, a good idea to study these examples in order to create our own Cypriot programme, in order to help in this way to stop the upward trend in the course of the rents”, concluded Mr Misirlis.
This article is republished from the Cyprus Mail website ( https://cyprus-mail.com/2022/07/17/turning-tenants-into-buyers/ )