When Cyprus’ fiscal and banking crisis culminated in the March 2013 bailout agreement, President Anastasiades’ government decided to help the economy return to growth as early as possible by giving the construction sector a boost throughout 2014; avoiding unemployment rates sky rocketing to an all-time high of 20%. This also included a number of supply and demand boosting measures to the Cyprus property market.
The so-called golden visa scheme has been a major reason behind the growth, economists say. At first the investment scheme required an overall investment in Cyprus of €5m, some of which had to be in property.
Issuing Cypriot passports to foreign property purchasers appears to have stalled any decline in property value on the island. According to Central Bank data, by Q2 of 2016, property prices had already started to recover. The scheme consequentially may have spared Cyprus banks any additional or long lasting financial damage.
Economists are questioning the extent to which the scheme has helped banks and other public institutions. One can allow that it did help somewhat by stabilising property prices and in turn the value of banks’ collateral. It is possible that protecting banks from a property price slump and stimulated growth.
Construction companies have reduced their NPLs considerably from €5 billion at the end of 2014 to €3 billion in September of last year. Lenders are however still struggling with a huge backlog of non-performing loans totaling more than €20 billion, which accounts for almost half of the total.
In 2017, 1,210 foreigners acquired properties as opposed to 952 the year before, according to the website of the Cyprus Department of Lands & Surveys, making out 15% of the respective total.
Some people object when Cyprus is criticised for selling passports and potentially allowing real estate agents and other intermediaries to abuse the scheme as well as displaying advertisments and other marketing material featuring the Cyprus passport as if for sale.
This year the council of ministers will update the scheme and provide guidelines prepared by the Cyprus Investment Promotion Agency that will include recommendations for carrying out promotion of the scheme and the banning of public and online advertisement with fines for offenders.