The incredible jump in property prices in Northern Cyprus is perhaps one of the most discussed topics affecting investors from all over the world in 2023. Some people believe that it is too late to buy apartments in Northern Cyprus, others believe that the market is just beginning to develop and prices will continue to rise, others even believe that a “soap bubble” has formed in the market and it is about to burst. For an expert opinion on all these guesses, we turned to the Founder and director of Proxy Investment Ltd, Mustafa Gurcafer for comment. 

"Foreign investment is 'flowing' to Northern Cyprus." All about prices and supply on the market

— Tell us about the situation on the real estate market in Northern Cyprus now. How true are the rumors that the “soap bubble” has burst?

— The property market in Northern Cyprus has truly transformed over the past few months. Now we see a growing amount of supply on the market, which allows buyers to already choose from existing options. At the same time, the sales situation looks the same as at the beginning of 2023 — demand is still quite high. If you open the sales statistics of large developers, you will see that almost all apartments have been sold. One of the region's top developers made record sales in their new project in the fall. Despite the fact that this is a 2,300 apartment project – the largest in Northern Cyprus – they have not only maintained sales levels, but increased them.

On the other hand, there are small construction companies that do not show such success, and this is understandable – they have entered a market with enormous competition, and they simply do not have the opportunity to compete for buyers with large market players. It’s projects like these – with 50 apartments from an unknown developer – that are really hard to sell.

As for the “soap bubble” in the market, in my opinion, this is nothing more than rumors from competitors from other countries. Those countries from which foreign investment flows to Northern Cyprus.

To be fair, it should be said that the current situation in the rental market is unstable. Because many completed apartments have appeared on the market, the owners of which are ready to rent them out. As a result, competition has increased, and not all apartments are successfully rented out with the promised rate of 15% but rather 10%. For example, one of the developers had a really successful rental and maintenance system that already had 4,000 completed apartments is bringing another 3,000 apartments to the market - do you think it’s easy to find tenants for such a quantity of housing? But the clients who were renting  are still coming to the island but preferring more luxurious or prestigious projects. As conclusion new investors would have to choose carefully which project they will choose from.

That is why it is very difficult to keep the ROI indicator at the same level (ROI is a financial ratio that characterizes the level of profitability or unprofitability of something - editor's note). If earlier we talked about the profit from purchasing real estate in Northern Cyprus at 12-15% per annum, now more and more often you can get 8-10%. However, there are management companies that provide enhanced service to their clients, and they manage to overcome this threshold.

— Have property prices in Northern Cyprus risen or fallen recently? What is the current minimum entry threshold for an investor to enter the market?

— At the beginning of 2023, real estate prices increased majorly. While this was great for the people who invested several years ago, companies decided to keep it in check in order not to lose couple of markets from their portfolio. When they’re announcing new project, off-plan prices are only slightly higher then the ones announced in recent history. However, you need to understand that market players — realtors and developers — clearly control this process in order to maintain the ROI at the same 10-12% and the capital increase of 40%-50% during construction stage. The basis of everything is the competent regulation of supply and demand.

There are still many ways to make money from apartments in Northern Cyprus. One of them is to buy an apartment and rent it out, and get your money back in 10 years. Another option is to buy a new building at an early stage of construction, and sell the apartment later, earning about 50%. In order to maintain profitability from resales, developers keep prices stable. This is a strategy that has been initiated by several leading companies. And I think this is right, because if they continue to increase prices, then we will not have any difference with other countries. As a result, buyers will not want to come to Northern Cyprus because the prices will be the same as in Paris.

Market players understand their advantages, so they keep our market interesting for buyers. That is why all companies observe limited price increases from the moment of pre-sales until the projects are ready. For example, a company that started building recently increased initial prices by no more than 10-15% relative to their previous project. And therefore investors will be able to make money after resale.

As for prices, if an investor now comes to the Northern Cyprus market, he should expect to pay 95,000CYP for a studio apartment. The maximum studio price level is 180,000 CYP. We recently sold a studio apartment for 187,000CYP, but it was part of a full service hotel with all the management of the property. The investor must understand what he is paying 187,000 CYP for - it will be a studio in a hotel, in a super cool location 30 meters from the sea (where the land itself is expensive), with a full package of all services. The average studio apartment in Northern Cyprus now costs around 120,000 CYP.

— Has the buyer profile changed?

— Yes, the buyer profile has really changed recently, and mainly the changes have affected the geography of the countries from which investors come. Now there are much fewer middle class investors from Eastern European countries, while more and more buyers are coming from EU countries: Poland, Germany, Lithuania. For example, an investor from Lithuania recently bought 90 apartments in a new project. Also, a significant part of the market is buyers from Sweden and Norway. The fewest buyers come from Italy and France. All this is not surprising, because the cost of real estate in Northern Cyprus still suits people from the European middle class.

Another interesting trend has emerged - businessmen from Russia and Ukraine who earn more than $5,000,000-10,000,000 buy entire projects or houses. They come to buy half of the project at the beginning of construction, and then resell this project at the commissioning stage. There are some investors who buy not houses, but large plots of land, understanding the prospects of the market.

View of the city of Kyrenia, Turkish Cyprus

The market is coming to regulation, and therefore stabilization

— What important innovations happened in the Northern Cyprus market in 2023?

— This year, the construction industry in Northern Cyprus is experiencing a real boom in growth and development. We see an ever-increasing number of construction companies, growing competition, and therefore an increase in the quality of construction. Modern residential complexes are appearing here, which in terms of internal and external design are not inferior to the newest complexes around the world, companies are opening with a full range of real estate management services, and the number of infrastructure facilities is growing. The construction business in Northern Cyprus has become a very profitable investment, and investors around the world have realized this. As a result, the growing amount of supply has created a situation in the market where supply exceeds demand. However, this does not mean that the demand for real estate has fallen - according to our company’s analytics, buyer demand remained at approximately the same level as at the beginning of the year (with a slight increase).

However, such an increase in the number of new construction companies has led to some chaos in the market - there are no uniform construction standards, uniform rules for working with clients, or a unified system for selling objects. Therefore, the problem of insufficient legal regulation of this industry has become obvious. And this year, the state decided to introduce new laws that are aimed at stabilizing the construction industry and protecting buyers in the future. For example, a decree was recently issued that a foreigner cannot open a construction company or be a developer on the island himself - shareholders must be 100% Cypriot. Before this, a foreign investor could find a 51% Cypriot partner and form a development company, this could have led to the fact that with any, even minor problem, a foreigner could simply close the company and leave. And no one could return the money to the shareholders who had already invested in this project.

Now the situation has changed radically, and this is certainly a positive trend. Because this will make the construction industry more reliable, where every builder values ​​his name and reputation, since he permanently lives here.

A similar situation exists with real estate agencies. In fact, anyone can open a real estate agency — all you need is a social media account and a phone number. It may not always be right or legal, but anyone who wants to sell real estate can get started even without any experience. It doesn’t matter where they came from or how long they’ve lived on the island. As a result, the incompetence of employees and ignorance of the basic laws of the country leads to serious mistakes and, as a consequence, loss of money to clients. As a result, such companies have a very negative impact on the reputation of the entire industry.

As the director of a real estate agency, I am interested in building a good reputation as a realtor and focus on making sure clients know exactly what they’re buying and make sure their investment is success. Not only for the sake of profit but also for the love i bear for my country. Every foreigner who is happy with their investment will pass on their experience in our country positively and take it further. However we have seen that foreign real estate companies , not  due to their intent but due to inexperience and incompetence or analyzing the market caused some problems for the people they represented.  

This has a drastic negative impact on the reputation of the entire industry. That is why the Association of Developers and Association  of Realtors of Northern Cyprus, together with the government, is actively working to create legislation in this area too.

— Is it possible to make some kind of forecast: what to expect from the situation on the real estate market in Northern Cyprus?

— It is obvious that the market will be stabilizing, and further property prices will have a healthy increase but buying of plan and selling in completion will be the most popular. The opening of the new airport will increase the amount of tourists coming tremendously and with the recent article from Forbes mentioning North Cyprus in 2024 article im confident that future will be even better. Next year we will see more discipline in the construction industry: more rules, more laws. Most of all, due to stricter and more structured regulation buyers will have safer investment environment.