While there are few property forums where the subject of Cyprus does not crop up on a regular basis, the fact is that the country is one of only three in the world which are currently seeing positive capital appreciation in their property markets. Cyprus may have its problems, many of which are associated with the past friction between the north and south of the island, but there is no doubt that the country is proving to be a very useful safe haven to investors looking to increase their exposure to the property market.
To understand exactly what is happening in Cyprus you really need to understand the history of the island, what has gone on before and what is happening now. There were a number of different situations holding the island back, especially the Turkish occupied northern section of the island. However there has been substantial movement in both political and international circles of late with the property sector emerging as a large benefactor of recent changes.
While Cyprus is one island and one country the northern and the southern sections are very different in their economic make up and inhabitants. In affect there are two enclaves in the region, the northern section which is inhabited by Turkish Cypriots and the southern section which is the home of Greek Cypriots. The island was affectively split in two in 1974 and a ‘green line’ introduced which is manned by national forces who’s sole aim is to ensure there is no infighting between the two enclaves. However, the internal friction between the two parties has been ongoing for decades even if the number of military skirmishes has been reduced.
For many years the northern area of the island was cut off from mainland Europe and many other areas of the world due to a lack of direct flights. Fortunately this situation has changed dramatically over the last couple of years and we have seen the number of direct flights to and from mainland Europe increase markedly in recent times. This has ensured that not only does the south benefit from increasing tourist numbers as well but the northern area of the island has literally taken on a new lease of life.
Over the years we have seen numerous attempts to get both sides around the bargaining table to try and create some kind of long term solution to the problems of the island. While there may never be a truly united Cyprus there are some who still hold out hope of a more relaxed atmosphere between the warring factions.
Talks are planned for the end of 2008 and 2009 at which it is hoped that a framework for further progress can be produced but while there is scope for improved relations on a political front, on the ground many people have long memories. You will hear different views of the historic wars between the two factions depending who you speak to and this is something which seems to have created a block in the political arena.
Even though there are still many difference between the two local governments on the island the northern section has seen the greatest economic growth of recent times, having started from a very low base. Tourism numbers are up and there is also a flourishing property sector with more and more people returning to region for the sun, sea and the sedate life on the island. When you consider that Cyprus has one of the lowest crime rates in Europe, is one of the more popular tourist destinations of late and is in the middle of an economic boom, everything looks to be rosy in the Cyprus garden.
Thankfully the Cyprus government has not sat back and enjoyed the view as the economy grew and have taken some of this new found wealth and invested heavily into areas such as infrastructure and tourist facilities. This ongoing reinvestment of the country’s new found wealth has ensured that there are more and more attractions to the area and a constant stream of property investors checking in at the airport.
While the Cyprus property market has been very buoyant over the last few years it has moved onto a new level in comparison to the more general worldwide performance of property. While many countries around the world toil under enormous financial pressure and economic slowdown, resulting in property price falls this year of up to 40%, the Cypriot economy as a whole continues to expand.
In deed over the course of 2008 there has been an increase in value of over 8% in the average property in Cyprus, something which is all the more remarkable against the background of international doom and gloom. However, there are still some issues which need to be resolved with regards to property ownership and the fact that much of the property in the north was taken from previous owners by force when the island split. There is a suggestion that this may put some earlier property purchases at risk in the future if there is found to be a legal basis to reclaim these properties.
The tourist industry is now far and away the most important element of the Cyprus economy, especially the north where the market has mushroomed over recent years. While this is all well and good when tourist markets are prosperous there is a concern that a long term commitment to this market would eventually put the economy at the beck and call of the international tourist.
However, praise must also go to the Cyprus government which has invested very heavily into local infrastructure and tourist facilities ensuring that their stock in the tourist industry continues to move higher.
While there is no doubt that Cyprus has performed surprisingly well over recent months there are specific reasons for this as touched on above. Even though the increase in the economy and property prices has been more marked in the north of late there is still a general feel good factor covering the whole country.
The issue of historic property ownership in the north is a concern and while unlikely to result in property reclamations in the short term there may be a small ongoing risk for some of the older properties from around the time Northern Cyprus declared independence (although this was not formerly recognised on a worldwide basis). On a more general note, the economy is still well positioned for further growth and the property market is holding up very well. It must be hoped that neither the economy nor the property market over heat as this could cause problems for local and international property investors.