The demand from wealthy Russians for real estate in Cyprus surged by 40.4% in the first quarter of 2019, according to a study by the Prian.ru service, the results of which were published by Kommersant.
The spike in interest was triggered by an announcement in winter that the Cypriot program of granting citizenship in exchange for investment in property would be made stricter. The amendments to Cyprus’s citizenship program came into force on 15 May, observes Prian.ru expert Filipp Brezin.
A baseline investment of €2 million is needed to qualify, and now an additional €75,000 contribution to the Research and Innovation Fund and the Cypriot Land Development Organization is also required. The amendments now obligate applicants to maintain the said investments for a period of five years after obtaining citizenship.
Initially, the investors who had considered participating in the program, but delayed for some reason, were afraid that it would be discontinued, Berezin explains. Although the new additions are purely cosmetic, many have rushed to acquire an EU passport under the existing conditions, he notes.
Among the most popular locations for Russians are Limassol and Paphos, followed by Larnaca, Ayia Napa and Protaras. In Larnaca, the demand is focused primarily on commercial property, whereas in Limasol and Paphos, Russians are purchasing facilities for personal use, observes Marina Shalaeva, director of the foreign property and private investments department at Knight Frank.
According to Cyprus’s Department of Land and Surveys, 1,060 contracts were registered in April 2019, which is 61% more than before, and the highest monthly figure since September 2008. In 2017, Cypriot citizenship through investment was obtained by 5,520 people. According to the Central Bank of Cyprus, 23.8% of them were Russians, 9.1% Brits, and 8.7% Ukrainians.
The stable growth in demand for residential investments has been a key factor behind the increasing property prices in Cyprus, Prian.ru notes. According to the central bank, the price index for residential property in Cyprus grew by 1.6% year-on-year in the third quarter of 2018. The number of construction permits being issued in Cyprus has been growing in parallel, with a 15% year-on-year increase in January 2019.
The property market in Cyprus has “seriously overheated”, and the offer prices are determined exclusively by the possibility of purchasing citizenship, Berezin warns: If the rules for granting citizenship change, the property prices in Cyprus could collapse. Prian.ru does not consider it impossible that the local government’s policies on this matter will be adjusted, since Cypriots themselves are actively expressing dissatisfaction with the current rules, which have resulted in it becoming virtually impossible for locals to buy property on the island.