Recently Cyprus entered its second local lockdown and the Cyprus Citizenship by Investment Program was terminated. These events that are inextricably linked to the real estate market.
Although the pandemic seems to have affected several categories of real estate, we believe that these changes would have taken place eventually and that it was only a matter of time. The pandemic simply acted as a catalyst for acceleration in this direction.
· Offices: Given recent technological developments and the fast speed of the internet, traffic on the streets and the lack of public transport in the cities, it seemed unnecessary for the average worker to spend up to two hours a day commuting to and from work. So many employers, with great relief, agreed for employees to work from home for two or three days a week. Working from home has been tested more in recent months, and seems to have had positive outcomes. Therefore, it is possible that this new way of working will continue and may become established as the norm in some cases. Companies have succeeded in cutting costs, needing less office area to meet operational needs and executives having a better quality of life and more time with family. Therefore, if the above continues, we would expect an increase in the supply of office space and a downward adjustment of rents.
· Commercial Spaces: We believe that commercial spaces will move in a similar direction, as a large part of the population has become familiar with online shopping and some even prefer it. People are now spending more time at home and the requirements for larger and better quality residential space have increased. People’s shopping needs are being met from the comfort of their homes. Therefore, while the demand for shops will decrease the demand for large warehouses will increase in order to meet the storage needs of large suppliers.
· Demand for Apartments: It is a fact that Cypriot Universities have invested heavily in attracting foreign students, the number of which has increased substantially in recent years. The inflow of foreign students formed the demand for a new product in the residential real estate sector, student dormitories. Private universities and investors have channeled significant funds into the construction of such projects. However, mainly in Nicosia and Limassol, the number of dormitories built were not sufficient to meet the housing requirements of students. As a result, demand for apartments and housing units in the city centers has skyrocketed, significantly raising rental prices.
The question that arises is whether this demand will continue in the new academic year, given the new circumstances brought about by the pandemic. In the case of universities, it remains unknown how many students will choose to travel to Cyprus while the situation regarding the pandemic remains fluid and the vaccination roll out for this age group appears to be moving slowly. An important factor that will determine enrollment levels and student flow will be the model of education that will be implemented. If, for example, it is deemed necessary for the courses to be carried out online, a model that was applied during the quarantine period, then the number of students who will be looking for accommodation in Cyprus in September is estimated to be reduced. The adaptation of universities to online learning is expected to improve thereby increasing the number of students as a whole, but at the same time it is expected to reduce the number of students that are physically sitting in a lecture hall. The latter will have the effect of reducing the demand for real estate aimed at students, as we assume most will prefer to stay home where there is a reduced cost of living.
Long-term Rentals: The reduction of travel and the cancellation of summer vacations have inevitably hit the Airbnb and short-term rental accommodation sector as well. In fact, in recent months there was a reduction of more than 80% in new bookings and a 90% cancellation in bookings. It is estimated that if the same situation continues, then many owners of short-term rental accommodation will prefer to let their properties on a long-term rental basis. This, in turn, will increase the supply of residential accommodation, with the corresponding impact of course on rents and yields.
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