11 June, 2020
Webinar | RCBI Program Updates – Cyprus
Did you miss our webinar which focused on the Cyprus citizenship and residency programmes? Here is a summary of the key points that were discussed.
Yiannos Trisokkas takes a look at the Cyprus citizenship and residency programmes under the current post-pandemic conditions
In a webinar held on 21 May 2020, Yiannos Trisokkas, the Managing Partner of Henley & Partners in Cyprus and Chairman of the firm’s Real Estate Committee, zeroed in on the Cyprus citizenship and residency programmes and responded to key questions from the audience. Below are the main points that were discussed.
Examining the Trends
Given that both the citizenship and residency programmes are linked primarily to the acquisition of real estate, the starting point of the webinar was an assessment of the current trends in the property market. From an investor’s perspective in particular, it is clear that buyers are guided by four main factors before making their final decision:
- 1. Location: Both city centre residences with easy access to amenities, as well as unique properties in touristic locations rank as the most desirable properties.
- 2. Availability of multiple units: Investors planning on generating rental income appreciate the opportunity of buying multiple units within the same development, if the total price is attractive.
- 3. Safe environment: Although Cyprus as a whole is recognized as a safe destination, buyers who are not very familiar with the island and the local lifestyle closely examine the surroundings of a given property.
- 4. Buyers interested in a single ultra-lux residence are more likely to be drawn to exclusive beachfront residences.
Contrary to what some might think, investors rarely give away €2 million simply in return for a passport. They are also not interested in making a donation with nothing in return. Rather, they are looking for properties that will generate income, either in the short term or over time. In most cases, they have one of 3 strategies:
- 1. To invest in touristic locations – whether in the resort centres or close to the beaches – where they can look forward to immediate income from short-term rentals to holidaymakers;
- 2. To invest in desirable residential locations that will attract long-term tenants;
- 3. To invest in properties that offer exceptional value for money (ie tempting price per square metre), usually for their own use, with a view to reselling after 5 years and benefitting from substantial capital appreciation.
One of the most important questions Trisokkas usually has to answer is not only where and how to enter the property market, but how and when to exit it. This is where a thorough understanding of the market and its cycles comes into play, as only a fraction of the buyers are seeking a second home to own for life.
Aftereffects of the Pandemic
Although Cyprus has managed the pandemic with remarkable success, there has been a global shift in the perception of property investors and especially those who are interested in citizenship or residency programmes. Already, the following predictions can be made:
- Given the global fears, lockdowns and restricted travel, it is not surprising that there has been a slight slowdown in demand. This is likely to lead to some correction of property prices.
- Safe and healthy environments, natural settings, and what is commonly referred to as the simple luxuries in life are gaining priority status.
- Investors are aware of the economic challenges most countries are facing, and are on the lookout for bargains, not excluding distressed assets.
- The most desirable options will remain the same: city centre and/or touristic locations, multiple units at a good price.
- As foreign direct investments are needed now more than ever, the government will maintain both programmes and seek to make them as appealing as possible.
Frequently Asked Questions
As always, Trisokkas was open to questions, and was happy to clarify a few points that regularly arise. The main points that were emphasized in the Q & A were as follows:
- Can a property be resold after being held for the minimum required period of 5 years, and can it then be sold to another CIP applicant?
The simple answer is yes, and yes, provided that the new investment is not under the €2 million minimum investment amount.
- Is the citizenship programme creating another property market bubble?
Unlike the situation in the years from 2003-2008, when banks were financing the property boom, the current growth in Cyprus is different. As all properties involve direct investments from high net worth individuals – without any loans being taken – it is unlikely that we will see any desperate sellers among them. Over the past 7 years, records show a minimum number of investors rushing to resell their properties. In other words, this is not a bubble that is waiting to burst.
- Are properties currently over-priced, simply in order to reach the sale price of €2 million in order to allow investors to qualify for the citizenship programme?
Sellers are free to ask any price they wish, so there may well be developers or property owners whose asking prices are inflated. That is why it is so important to consult a chartered surveyor for a realistic evaluation, or at least be guided by a reputable real estate agent, who will himself request a professional evaluation if deemed necessary.
- What other costs should an investor applying for Cyprus citizenship by investment be aware of?
New properties are subject to VAT, which is quite substantial. Buyers of resale properties will have to pay the transfer fees. Stamp duties will amount to €4000 to €5000. Then there are the service provider’s fees.
- Which documents related to the property investment must support the citizenship application?
As evidence of the investment, the applicant must submit the contract of sale which was submitted to the Land Registry, the sale invoice, and the SWIFT transfer order. Those are usually enough.
- What is the expected timeline for processing the citizenship application?
In the early days, applications could be examined in less than 2 months. With the current volume and required due diligence the process should be completed in 6 months. Unfortunately, there have been delays, up to a year or even more, but the process is being streamlined and accelerated to be able to adhere to the 6-months guideline.
- Is it possible to replace the original property that was purchased within the framework of the residency or citizenship programme with another one?
Technically, yes, provided the change – that is the sale and new purchase – are made on the same day, to demonstrate without a doubt that one is replacing the other.