Assetz® News - Diverse buying - the key to Cyprus progress?

Diverse buying - the key to Cyprus progress?

30th October 2008 |

With the credit crunch hitting several island nations, not least our own, the fortunes of Cyprus may be closely watched by British investors hoping to make acquisitions in the market there.

But while Britain faces recession, Ireland is already in one and Iceland has gone running to the International Monetary Fund to bail it out, Cyprus, it seems, could be in a better position.

Such a view would certainly match that of the Royal Institution of Chartered Surveyors (Rics), which has stated that the economy of Cyprus has weathered the storm quite well so far. Furthermore, the body has added, it expects the country to do well out of its ten-month-old eurozone membership due to the benefits of the 0.5 per cent cut made by the European Central Bank (ECB) this month in conjunction with other central banks such as the Bank of England and the US Federal Reserve.

The ECB may or may not cut again shortly in response to the fact that the Federal Reserve has lowered its rate again today. Whether or not that is the case, however, Cyprus has, it seems, another advantage to bolster its property market.

Jonathon Salsbury, manager of developer Cybarco, explained that this is to do with a diversification that has taken place in the Cypriot property market in the last year. He noted: "Up until the autumn of last year, the British buyer was a major percentage; a very strong element in the purchase of properties in Cyprus."

This, of course, could be problematical. If the effects on the wallets of British buyers hit by the credit crunch, higher inflation and the falling receipts from sales of property in Britain fed through to the Cyprus market, the consequences would be obviously negative.

However, the situation that has developed since last autumn has provided a new buffer for the Cypriot market, Mr Salsbury explained. New buying has come from the former Soviet states in the form of Russian and Kazakh investors, as well as from the Middle East. The wealth of many Russians from the Oligarchs downwards is well documented, as is the huge oil wealth of the Gulf states. But Kazakhstan is also rich in fossil fuels and enjoying a growing economy, belying its Borat sterotype.

But, noted Mr Salsbury, there is also the domestic market, concluding: "In addition, the Cypriots themselves buy second homes in a reasonable number, so you've got a market that’s not entirely dependent on international buyers and certainly not dependent on the British market."

So it seems that while there may be less Britons now, there are other overseas investors plus the domestic market to help keep the pot boiling. Given the Rics view of Cypriot economic prospects, plus that of the International Monetary Fund - which has tipped 3.4 per cent economic growth this year and 2.8 per cent in 2009 - it could just be that Cyprus is in an extremely strong position to see off the crisis, making it a sound place for those Britons who are investing now, as well as a good future prospect for those who enter the market in better times ahead.