Production

Potential Brexit impact on property market

This is the second article we are writing on the subject of Britain’s upcoming EU membership referendum next month, keeping a close eye on ongoing developments, and focusing in particular on the possible ‘Brexit’ of Great Britain from the bloc.

This week, we return to the topic of the plebiscite once more, with additional commentary.

The referendum is now nearing the June 23 vote with various reports and announcements coming in from all directions, including from US President Barack Obama, the UK’s Central Bank, the British Chambers of Commerce, the Chancellor of the Exchequer, and so forth. Such input is making us ever more worried about the future, especially over the scenario of a possible downturn of the UK economy and drop in value of sterling to euro.

� There are 1,040,000 UK visitors/tourists p.a. (according to the most recent 2015 statistics), i.e. 40% of the total visitors to the island. Therefore, an expected reduction in this market source due to sterling’s projected fall will have a direct and negative impact on the local tourist trade, on which just about everything depends in Cyprus.

� A reduction in sterling’s value in comparison to the euro will also mean greater numbers of properties in Cyprus will be more expensive for Brits to buy, much to the delight of existing UK owners wishing to sell and an additional cost for the newcomers. So for those British owners who intend to sell real estate in Cyprus, we would advise holding off for a month, and for those who want to buy now it may be a gamble to rush into a deal.

� In economy terms, this country is directly connected to the United Kingdom’s own. So the ups and downs of the British economy affect the island as well. And this is especially the case at this time, with the political situation of Egypt and other Mediterranean countries, including Turkey, having so far benefited us. Thus, we stand potentially to lose out on this opportunity in the event of a Brexit.

� Our neighbour in Pissouri asked me: “should I sell now or should I wait?” I told them to wait, which is a reasonable answer, albeit that they can’t sell their property anyway within the next two months.

� The British market is on the up, regarding demand for (mainly) homes, and in particular for property in the Famagusta and Paphos areas.

This trend is the outcome of re-sales, with the original buyers leaving the island on account of all sorts of challenges, though age or changing circumstances – e.g. divorces, death – are the main reasons. Such re-sales draw relatively very low prices, while the non title-deed issue is a parallel point, with the speeded-up procedure now causing owners to wait before disposing of property.

� The recent announcement by Chancellor of the Exchequer George Osborne is another warning to worry about. He predicted that a Brexit would negatively affect house/property prices in the UK, while interest rates on loans would rise.

In this case, re-mortgaging one’s home and/or selling the same in order to buy abroad would be more difficult, aside from the uncertainty of the UK market. This would have a negative impact on Cyprus, as well as on other countries whose real estate is appealing to British buyers, such as Spain, Portugal, Malta, and so forth.

Meanwhile, for most of us in Cyprus, whether we are Greek Cypriots or Turkish Cypriots, the United Kingdom is more or less a second home or country, either because of Cypriot migration to Britain during the Sixties, or, more importantly, due to the island’s younger generation’s university studies there and the contacts which they maintain following their degrees.

A reduction in the sterling’s value would thus discourage Cypriot graduates from repatriating, but conversely would also increase demand for UK universities, due to the comparatively lower fees.

So, in addition to the economic challenges that could follow, there is also certain feelings of duty, love and respect for Britain that most Cypriot professionals have been brought up with, as well as their having been instilled in the Cypriot migrants of the Sixties.

Thus, we wish the UK and its people all the best with the upcoming referendum, even though much of this came about by Prime Minister David Cameron threatening to leave the European Union, and now he has to say otherwise.

For our part, we are worried and scared by the pending referendum developments.

Source: In-Cyprus