The changing face of Cyprus’ investment immigration market

With the ever changing dynamics in the global real estate market, it has become inextricably linked to people on the move. In Cyprus, it all began when the minister of finance announced changes to its citizenship programs. It was a remarkable piece of policymaking and one that propelled Cyprus property developers into the world of migration. It was at this pointselling property turned on its head for many developers who instead of selling homes found themselves talking immigration. 

The programs became an overnight success, drawing in over 5 billion euro to Cyprus economy. But there were also similarities emerging between the southern European property boom of the late 90s and early 2000s. It appeared to be happening again, this time in the Cyprus market.  

At the turn of the century, for many northern Europeans, a holiday home in the sun became a must-have commodityProperty companies were eager to help the droves of Europeans starved of good weather and limited hours of daylightMediterranean countries reaped the huge benefits of this totally unregulated industry. Fueled by greed and lack of regulation, things spiraled out of control. Property prices spiked. Bad practices became the norm, leaving the consumer to pick up the collateral damage. Many left in serious debt, unable to sell their properties as the market collapsed. Banks eager to lend were now repossessing. Unlicensed property agents simply disappeared, leaving credible companies and the government to pick up the pieces with a vow that this would never happen again. 

WHERE IS THE MARKET HEADED? 

There is now a different product but potentially the same problem. This time, the industry is leveraging on those people who, by way of securing either a passport or permanent residency, are looking to move to Cyprus for security, political stability or to ring fence their assets and with it the future of their up-and-coming generations. While the schemes themselves are highly regulated by the respective governments, as is the legal process, where the industry has failed to take control is with the companies and individuals tasked to find the clients.  

Traditionally, the responsibility of immigration companies that we now see is a plethora of marketing agencies all actively promoting programs and the best deals for both themselves and their clients. It’s totally unregulated. There are offers of high guaranteed rental returns well over the market rate and promises to cover all fees, even to pay the VAT. But let’s get realistic. The only person paying for this is the investor in the inflated price of the property he is investing in. It sounds great in the short term, but where does this leave the investor when he realizeafter three years that his investment is worth less than what he paid for it? 

At the end of the day, if an investment has a return of 10 percent or more, why would a good business offer it to you? Realistically, an investment that offers a return of at least double what you can get with a bank deposit is considered a good investment when also taking into account capital growth.  

STRIVING TO REGULATE THE MARKET 

With the Cyprus government aware of what happened 15 years ago, while keen to continue with its successful citizenship program, it is equally keen to ensure that it is regulated. It has created Cyprus new code of conduct and enhanced due diligence. In May of this year, the government introduced a cap of 700 citizenships per year. It also introduced enhanced due diligence procedures on applicants to protect against money laundering and corruption although it must be stated that the existing global banking regulations already cover this.    

From July 31, 2018, applications for naturalization may be submitted only by registered service providers. Property developers, law and accounting firms and other professionals are required to sign and comply with the provisions of a code of conduct, which among others, obliges them to verify the legitimacy of an investor’s funds and refrain from advertising the scheme as a Cypriot passport sale. The registry will be published on July 31, 2018 on the websites of the ministries of Finance and Interior as well as Invest Cyprus (the former Cyprus Investment Promotion Agency) 

Those who comply, namely the reputable firms and developers qualified to offer the programs, will have nothing to fear. Those simply out to maximiztheir gain, at the cost of the consumer, will fall by the wayside. The winner will be customers who can buy with the knowledge that their investment is safe, secure and realistic.  

The Cyprus passport has become highly sought after and that links real estate hand in hand to the world of migration. This move basically catapulted property developers into a totally new dimension. But let’s be honest: Property developers are not immigration experts, nor should they be. Similarly, immigration companies are not licensed to sell property, yet both find themselves having to work together to fulfill the needs of the programs. Regulation can only be a good thing.  

Since introducing the program over five years ago, it has generated over 5 billion euros into the Cyprus economy. It is fair to say that this was one of the primary factors that saw the economy do a 180-degree turn in just 18 months. It was a piece of genius on the part of the finance minister to not only bring investment into the country, but to create something that would generate jobs in construction and the service sector and, consequently, make Cyprus one of  the fastest growing economy in Europe. Other contributing factors driving investment and people into Cyprus have been the oil and gas exploration, shipping industry, a huge corporate and financial services sector, and a massive 17 percent increase in tourism.  

Permanent residency in 60 days, a Cyprus passport (with full E.U. rights) in 90 days, and the offer of complete security and freedom of movement are the primary reasons why people are flooding to Cyprus. Indeed, Europe as a continent is such an attractive proposition, offering a wealth of opportunity and security for future generations. With the steps that the government is now taking to protect the rights of the consumer, this means people can invest their money safe with the knowledge that their well-being and needs will always come first. 

More governments should follow Cyprus lead.  

About the Author

Pauline Gallagher
Pauline Gallagher
Pauline Gallagher is vice president of private clients for the Domenica Group based in Paphos, Cyprus. Gallagher has an unreserved passion for real estate. She is fascinated and energized by the changing dynamics of the global real estate market. Gallagher’s work has taken her to many diverse countries and environments when required. Domenica is a company that delivers on its promises. It offers a wide range of services, from residential and commercial real estate to property management and hotels. Domenica is a second-generation family business with a goal of happy customers.

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