As a year round sun investment location, Cyprus has it all - tourism is booming, property supply cannot meet demand, taxes are low, and now the government has announced bold moves that could turn the island into the Hong Kong of the Med.
An economy that relies only on tourism is essentially pegging its material well-being to the economic success of the countries from where its visitors come.
Many places have made a great success of taking this approach and have prospered as a result.
But tourist destinations can come into, and go out of fashion.
So a sun location that also has a booming domestically driven economy is especially attractive - think Spain's twin development over the last 40-plus years, as both a cheap tourist destination and then, more latterly, as a booming European tiger economy.
Give Cyprus - Greek Cyprus, that is - an economic health check and it comes out looking about as attractive as it gets!
In Cyprus' case the twin economic drivers are tourism and the development of a retiree market, for sure, but also its role as a major shipping and logistics centre.
As products cross the globe at an increasingly fast pace and at ever increasing volume, it is islands with deep water ports that make for the best and most convenient logistics bases, especially for trans-shipment. Think Singapore and, perhaps the best example - Hong Kong.
The wealth of modern Hong Kong is built on two things: finance and shipping - or more precisely the re-shipment of goods, China's goods.
And then think Cyprus.
Cyprus is superbly positioned for future development as a logistics centre, and especially as a reshipment centre.
Geographically, set as it is in the eastern part of the Mediterranean, it is in a perfect position - almost slap bang in the middle of shipping lanes joining Europe and the middle east, and onwards, through the Suez, to the far east.
And, in fact, Cyprus' connections with maritime trade and shipping go back millennia.
Modern Cyprus has preserved and is developing this maritime trading tradition.
Just as Hong Kong based its phenomenal economic success on acting as an entrepot between China and the rest of the world, so is Cyprus actively seeking to develop its role as one of the world's major logistics centres, bridging the middle east and western Europe.
Already the island has a highly developed port industry, with modern and flexible cargo facilities at Larnaca and Limassol, the new port of Vassiliko, along with three oil terminals - Larnaca, Dhekelia and Moni.
A £300 million investment is planned for Limassol to drastically expand its container handling capacity by 2010.
Creating a Hong Kong-like shipping centre in the Med
Now, the government appears determined to exploit its unique position as an entrepot.
Industry and Tourism Minister George Lillikas announced as much when unveiling details of the government's plans to capture increased foreign direct investment (FDI).
Lillikas said that the government will set up a state-owned Cyprus Investment Promotion Agency (CIPA), as well as launch new red tape cutting measures for projects deemed crucial to economic development, along with the 2006 Strategic Action Plan fro Foreign Investors, which is aimed at getting the message across that Cyprus is a god investment target.
'Our basic aim is to attract foreign funds for immediate investments in fields like the production of high technology products and the transfer of technical knowledge,' Lillikas said.
Lillikas went on to pretty much sum up Cyprus' key assets, saying it would continue to exploit them to attract foreign investment:
• Geographical position
• A corporate tax rate of 10%
• EU membership
• Network of double tax treaties
• Great year-round climate
• High quality infrastructure
Lillikas said: 'All these advantages as well as the revolution mainly in the sectors of information and communications create the conditions to establish Cyprus as the main trade, finance and services centre in the Eastern Mediterranean, as the pipeline that will connect a market of 450 million Europeans with 300 million consumers of the Middle East.'
Ambitious perhaps - but nothing much is ever achieved without some ambition.
Record visitor numbers
And when it comes to the tourist market, the Greek side of Cyprus - southern Cyprus - is booming.
In the west lies Paphos a developed location with a healthy rental and resale market whereas on the east side lies Paralimni, which is expected to grow faster as it rapidly develops from a 3 star resort into a 4 star destination.
However, both sides of the island are attractive to investors for the simple reason that demand is strong (especially from the growing retirement /snow bird market) and supply of properties is severely limited.
Much of Cyprus is subject to a maximum building height of 2 or 3 stories. And given that the island is mountainous and small, there is a severe shortage of potential building land.
Developers reckon that they will run out of development land within 5 years.
In addition, the warm winter climate makes Cyprus a superb retirement and winter sun destination. It is one of the few European locations (along with parts of South East Spain and the Canary islands) that can boast a warm and dry climate during the cold winter months.
Add to this low tax rates and the golfing and sailing infrastructure - particularly in the south east, and you have an almost perfect Snow Bird destination.
Lastly, Cyprus is culturally British with English widely spoken with English law forming the basis of Cypriot law - all of which adds to its appeal to the target (and expanding) retirement market.
Think retirement market not tourist market!
As experience in Spain has shown, it is the retirement market (not holiday market) that buys property and rents apartments. As Brits can now secure 80% loan to value mortgages, this should ensure Cyprus delivers the highest returns on investment of any 'Sun' type market for the next 5 or more years.
Even so, the general trend of tourist arrivals is on the up and this is great news for the diverse and growing tourist market in Cyprus.
This is not a bargain basement holiday destination, and so rentals of holiday apartments are not discounted by ultra-cheap package holidays.
In August, arrivals to Cyprus rose by 10% compared to the same month in 2004.
Latest data from the Passenger Survey, tourist arrivals reached 336,587 in August 2005, compared with 305,926 in the same month a year earlier.
This is the highest number of tourists during August - the peak month - for five years, and possibly more - records only reach back to 2000.
Tourists from the UK continue to make up the lion's share of visitors - over 50%. And their numbers rose by more than the average of 10.2%.
Germany, Greece and Israel are the next largest markets (in order), after the UK - and arrivals from Germany were up by 26.2% year on year, from Greece by 32.8% and from Israel by 32.1%.
In the past two years, property values on the island have soared at between 25% and 30% a
In the years before that, the annual property increases were slightly lower, but still a healthy 10% to 15% a year. In other words, for the past five years, property on the island has been appreciating at between 10% and 30% a year.
In the short term we believe that property on Cyprus will accelerate by 20% a year, or by 40% on average over the next two years.
Mortgages and VAT will open the floodgates for Cyprus property price growth. The cost of borrowing will become widely available at 30% cheaper than at present, and VAT will add another 10% to prices over two years.
Loan rates a full 1% lower than have so far been available are now on offer and - the really big factor - the loans are over a possible 25 years. Admittedly, even at Property Secrets, with so much going for Cyprus as a property hotspot, the great mystery has been: WHY hasn't it taken off?
The answer? Our analysis points clearly to the single major factor, which until now has been strangling Cyprus as an investment centre - the lack of attractive finance on the island.
THEN - previously, lenders were offering 15-year mortgages at 70% LTV at about 250 points over base rate - loans at about 8%, plus 7% per annum capital repayment. A total of 15%.
With rates a full point lower and mortgages over 25 years, things have changed.
NOW - so with a 25-year loan at, say, 160 basis points over base rate, you have finance costs of 7% interest, plus 4% cap repayment, a total of 11%.
That's a price cut in the cost of finance of almost 30%, which we believe will fuel property rises of AT LEAST 30% but far closer to the 40% we predict - because demand is growing and there's the VAT element to factor in.
Longer term, we believe that Cyprus joining the EURO zone in 2007/08 - if this indeed goes ahead - will give the market a further fillip in the years following.
This will be especially attractive to investors from elsewhere in the EURO zone because currency fluctuation worries will be discounted.
Article from PROPERTY SECRETS