Investing in real estate yields stable returns

Negative interest rates are here and they are part of the new reality. Cyprus’ largest banks have already begun applying negative interest rates on corporate and institutional investor deposits, following the model of large European banks.

As a matter of fact, major European banks have been charging sub-zero interest rates since 2014, in an effort to manage the cost entailed by the European Central Bank's decision to charge banks a 0.6% negative interest rate, citing low inflation and weak growth. As is well known, this policy has been established due to an extremely high excess liquidity, which is being directed toward investment and development activities, through zero and/or negative interest rates.

As a result of the negative interest rate policy, many depositors in Cyprus and the rest of Europe are turning to low-risk investments. As such, their first choice is the real estate market, which is already absorbing a significant percentage of the surplus liquidity, since investing in real estate is seen as a low-risk investment with stable returns.                                              

It is a fact that traditionally, Cypriots have been emotionally attached to their land and property. They prefer to invest in tangible assets (fixed assets) with annual returns, rather than intangible investments such as equities, bonds, etc. In addition, the real estate market is considered to be less volatile and more attractive than other traditional sources of income, such as interest on deposits or various pension schemes.

The Cypriot market today offers attractive investment opportunities, as many professionals of the industry have improved their product offering, both in terms of quality and design. Furthermore, as a result of the continuous increase in rental prices in almost all districts of Cyprus, people can get a steady monthly income. This development, accompanied by an increase in property market value, has made real estate the first choice for investment. Cyprus offers many opportunities - from inland to coastal areas - and for all budgets. Moreover, Airbnb-style renting has also created additional opportunities as property management has gained a new, more interesting dimension. Compared to ten years ago, one would say that today we have a market that offers various types of commercial, tourist, residential and/or development properties and land for all preferences.

As such, the negative interest rate environment has transformed the market and created conditions for high-quality investments, which in turn represent a crucial parameter in order to achieve economic growth and create long-term prosperity.

* Executive Director of Giovani Group

*By Antonis Antoniou