Cyprus general Information
Cyprus is the third largest and third most populous island in the Mediterranean covering an area of approximately 9,251sq. km. Cyprus promotes its geographical location as a “bridge” between East and West. It is situated in the north-eastern corner of the Mediterranean basin east of Greece, south of Turkey, west of Syria and Lebanon, northwest of Israel and north of Egypt.
Nicosia, the capital of the island, is dominated by government services and houses the headquarters of most banks and finance houses. Limassol, the second largest city, houses the main commercial port having the highest proportion of overseas residents and of companies active in shipping. Larnaca and Paphos house the island’s international airports, with both cities having a sizeable proportion of overseas residents and a rapidly expanding tourist industry.
Cyprus is a member of the European Union, the United Nations, the Commonwealth and the Council of Europe. Cyprus is an independent, sovereign Republic with a presidential system of government. The president is elected for five years directly by the people in a secret ballot. The president ensures executive power through a Council of ministers, appointed by him.The legislative body of the country is the House of Representatives which comprises of 56 elected members. The legal system is based is based on English law. Cyprus has an open, free market, service-base economy with some light manufacturing.
Since 1974, the Republic of Cyprus is de facto partitioned into two main parts; the area under the effective control of the Republic, comprising about 59% of the island’s area, and the Turkish-controlled area in the north, covering about 36% of the island’s area. The international community considers the northern part of the island under occupation by Turkish forces.
Cyprus Property Market in general
Despite the difficulties of the Turkish invasion, the government together with the enterprising private sector, made the economic recovery of the island possible. Cyprus Economy has been transformed from a basic agricultural, underdeveloped one, into an economy with an open free market, a Westernized standard of living, an internationally important tourist center and a fast growing real estate market.
The property market experienced significant growth, both in terms of demand, prices and supply, during 2004 – 2008. The main drivers were the government’s open policy for foreign investments (especially from Russia), entry of the island in to the EU, cut in interest rates, increased lending by most local banks and coops, increased overseas demand for holiday houses and a balanced political risk from the negotiations for the settlement of the Cyprus problem. The result was significant growth in construction activity and an increase in all property prices.
After 2008 and in the middle of 2009, the global crisis has started to affect the Cyprus property market. Overseas demand had been reduced creating a general oversupply of properties, construction sector employment and spending in construction has dropped, financial institutions have almost stopped lending and increased interest rates. The credit crisis has also affected the demand for property at a local level and the ability of Cypriot citizens to buy has been reduced notably. The result was a general slowdown and a decline on property values.
Further to the above, the debt crisis in Greece and the Greek government being unable to pay back investors, including Cypriot banks which have invested in to Greek government bonds were disastrous triggering factors of the current economic recession in Cyprus.
This slowdown in to the property market was an expected consequence of the strong increases of the previous years (2004-2008), which made properties unaffordable for the average buyer.
Moreover the growing competition from cheaper markets, such as Bulgaria, Turkey and Croatia shifted some of the international and local investors away from Cyprus.
However, with the recent exploration of natural gas and oil deposits there is hope that the state of the economy and the property market will improve in to the near future.