Property Prices Poised to Rise (in Northern Cyprus) says Matt Gammie, 23 September 2008

Property prices in North Cyprus are already nudging upwards alongside the revived reunification talks between the left-winger Demetris Christofias and his ideological fellow and apparent friend, the Turkish Cypriot Mehmet Ali Talat. Yesterday the UN’s Envoy to Cyprus – the Australian Alexander Downer – returned to Cyprus after meetings in both Athens and Ankara, to help move negotiations along. The similarities in Talat and Christofias’s ideology, their separately announced desire for reunification and Turkey’s aim of joining the EU are all contributing factors to the sense of optimism with which many commentators, investors and journalists are now viewing the Cyprus problem.

For many years reunification talks on the island stalled, thanks to the anti-reunification stance of Christofias’s precursor, Tassos Papadopoulos. At the same time, North Cyprus has been isolated from trading with the EU since 1994, and has not had direct flights from any country other than Turkey since the division of the island. The result on property prices in North Cyprus is that they have remained low – between a half and a third those of the south – even though they benefit from the natural beauty of the northern portion of the island, the relaxed Cypriot lifestyle and, of course, the same glorious weather.

Since North Cypriots approved, via referendum, the Annan Plan in 2004, the EU has partially made good on a vouch designed to reward this positive step. Although it had hoped to open North Cyprus back up to trade – currently import duties for the north run at around 40% because everything must be imported via Turkey – the best that they could achieve was a situation known as the Green Line Mechanism, which allows for the North to export products to the South. The opening of the border has not just affected trade (which will, of course, push up house prices as the economy builds itself up) but also tourism, as it is now possible to fly to the south of the island and then simply cross the border into the north. The layover in Turkey is no longer necessary, and because of that the numbers of tourists to the area are snowballing. This is, of course, good news for people who want to buy property as a rental investment and many monthly rental forecasts in the area now outstrip the monthly mortgage repayment; an attractive prospect for investors looking to benefit from an emerging market.

After the first meeting, at the beginning of this month, between Talat and Christofias, optimism has continued to grow. Both men agreed to meet roughly once every week to continue fleshing out the details for a workable blueprint for peace. Also, in a nice and symbolic gesture they wired up a direct line between one another’s offices, to show the new-found closeness between the two administrations.

The talks today, which begin at 10 o’clock local time, are expected to centre on the issue of power sharing in a reunified, or partner state. This subject has proved controversial and near insurmountable in the past, but this round of negotiations is expected to focus on issues that the leaders do agree on, leaving those that they do not for later in the process.