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Brits and Russians in Cyprus

BloombergAs financial difficulties have hit the U.K., British buyers in Cyprus have sold off holiday homes; however, these are not often suitable for sale on the Russian market.

While news from the Cypriot property market is not particularly positive, as stagnation sets in one particular change has been the gain Russian buyers have made on the British as leading purchasers of real estate on the island.

Cyprus has escaped the global economic downturn no lighter than the many other elite property markets of Europe that boomed in the four to five years before 2008. Larnaca and Pafos have suffered most, said Yulia Tishkova, a property consultant at AVC Real Estate. “More precisely, [properties] in the most popular destinations for foreign investors have been hardest hit,” she said, citing data from major developers on the island. Limassol, the country’s second largest city, has suffered much less, Tishkova added, as developers there have refused to lower their prices.

The Cypriot market has suffered especially as a result of the weakened position of British buyers. “The biggest problem for the Cypriot market is that the British were the principle buyers,” said Mikhail Brustinov. “As the crisis has hit Britain hard and British investors have had problems with financing and credit, they have started to sell the properties they had in Cyprus,” he said.

This has increased supply in certain areas. There has been a fall in prices for elite real estate on the island of around 35 percent, Brustinov said. In Larnaca the average price of an apartment fell by 20.5 percent in 2009, while the cost of a villa went down by 18.7 percent, according to data from AVC Real Estate. In Pafos the situation was slightly better. Apartment prices fell by 13.4 percent and those for villas by 16.3 percent.

However, the situation in Limassol has fluctuated. Prices for villas and apartments in the resort fell by 3.5 percent and 2.4 percent respectively at the beginning of 2009 and then began to grow at the start of 2010, by 3.8 percent and 4.2 percent. Overall prices in the town rose only slightly over 2009 by 0.3 percent for villas and 1.8 percent for apartments, and while Tishkova expects no major improvement in prices over the next half year, she did point to a small rise in Limassol of one to two percent.

This could be connected with the strong presence of Russian buyers in this particular area. “Limassol more than anywhere else attracts Russian buyers,” said Tishkova. Of the town's population, 40 percent are Russian speaking, of which 32 percent are Russian citizens, data from AVC Real Estate showed. “In Limassol Russian schools and Orthodox Churches have been built, and a Russian-language television and radio service has been set up,” Tishkova added.

British buyers remain dominant, accounting for 47 percent of purchases, but Russians now make 38 percent of the acquisitions on the market.

The number of Russians buying property in Cyprus is growing, as a consequence the proportion of Russians active on the market has changed significantly. Where in 2008 61 percent of foreign buyers in the country were British, and 26 percent Russian, the figures for 2009 show a leveling playing field. British buyers remain dominant, accounting for 47 percent of purchases, but Russians now make 38 percent of the acquisitions on the market. Scandinavians are also showing increasing interest in properties in Cyprus.

One of the key attractions of Cyprus for Russians is that the country is set to join the Schengen visa zone in 2011. “Property in Cyprus provides owners with a residency permit,” said Brustinov. This will also then provide buyers a visa to travel around the Schengen zone. “It’s very important for Russians,” he added.

The problem for developers is that it will not be easy simply to move their target market from Britain to Russia. “The demands of British and Russian buyers are dramatically different,” said Brutinov. The British look for properties to be holiday homes, or dachas, he explained. “They are not interested in high-quality fittings... They just want to come and relax with their families.”

Russians, however, are much more concerned with the construction quality, fittings, appointment and appearance of the building. One example that Brustinov cited is the villas on the island built with imported Lebanese stone that has been individually carved.

The type of property also differs. “Above all Russian buyers acquire detached villas and houses,” said Tishkova. While 53 percent are looking to buy villas or stand-alone properties, only 13 percent of those interested in the Cypriot market are seeking apartments.

The difference is no new phenomenon. Development projects on the island have long targeted their products at one or other market. “Those firms that built for the British market and those who concentrated on the Russian market, built completely different projects,” said Brustinov.

As the number of British buyers on the market falls, companies that focused predominantly on that market have been very hard hit. Many are now turning to the Russian market as a potential source of buyers, but this is not necessarily easy. “Those companies that built their properties for the British market cannot sell them now on the Russian market,” Brustinov said.

Russian clients can have some quite specific demands, including nannies, drivers and translators. “They almost always want a chef,” said Lucas Kitru, the real estate sales manager at Aphrodite Hills, adding that he is not surprised by anything. The resort, which is located 17 kilometers east of Pafos, combines one-, two- and three-bedroom apartments, villas, a spa and sports center as well as all the features that accompany the 290-room Intercontinental Hotel.

Of the 650 properties on the resort already sold, many have gone to Russians, who tend to purchase properties at the very top of the resort’s scale. Aphrodite Hills is split into specific areas, one of which, Thesius Village, was completed in summer 2009, with apartments clustered around communal pools, and villas with private pools among them. Prices for an average 55-square-meter one-bedroom apartment start from around 390,000 euros ($526,000), while the smallest villas are priced from around 1.2 million euros ($1.6 million) for 145 square meters, ranging up to 2 million euros for a four-bedroom, 213-square-meter villa.

However, the properties that are of most interest to Russian buyers are the resort's individual villas, often custom built to suit their owners. The resort offers plots of land for buyers to build their own properties — although the company does offer a choice of 12 different pre-drawn designs. There are also restrictions on the percentage of a plot that can be developed. Overall the resort is only eight percent developed, in line with Cypriot rules on construction in areas of natural beauty.

One Russian buyer purchased a property complete with banya for 3 million euros ($4.05 million), in an area of the 234-hectare resort that he has nicknamed mini-Rublyovka, after the prestigious area to the west of the Russian capital, beyond the Moscow Ring Road. However, the resort’s top-priced property was sold around two years ago for close to 6 million euros ($8.1 million) — to neither a Russian nor British buyer.

While the resort’s British-to-Russian ratio remains closer to the island’s 2008 figures, at 60 percent and 25 percent respectively, the Russian market is growing in importance for Aphrodite Hills. “We know the Russia market well and now understand the specifics of Russian clients,” said Kitru.

One area where British and Russian buyers are coming closer together is golf. The country is particularly popular with British golfers, especially in the winter months. The game, although not as long and well established in Russia, has grown in prominence over the last few years. “When I first began to visit Moscow I was surprised, golf is becoming more and more popular in Russia,” said Kitru. The Aphrodite Hills resort has an 18-hole course spread out on both sides of the valley in which it is built. But, while golf has begun to gain popularity among Russia’s elite, it is still far from being the much more popular middle-class sport that it is in the Anglophone world. “Not all Russian clients are particularly interested in golf,” said Kitru.

“Russian buyers can be roughly divided into three groups,” said Brustinov. First he named those that plan to leave Russia completely, noting, however, that their numbers are the fewest. Aphrodite Hills counts a few such buyers among its residents. They have chosen to set up a permanent home in the resort, taking advantage of local schools and the luxury life.

The largest group of buyers is those seeking to set up a second or holiday home. Whether the property is an investment for their children, old age, parents or a combination of them all, these buyers are temporary but regular residents on the island. The final group, in between the other two in terms of size, are those looking to acquire properties purely as an investment. These, however, have been much reduced in number recently.

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