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The real estate landscape in Cyprus: The risks of investing in Northern Cyprus
While Cyprus offers an attractive real estate market, investors must be aware of the risks when considering the occupied territory of the island. Investing in Northern Cyprus presents challenges that can affect investment outcomes. In this article, we examine the risks of investing in the occupied territory of Cyprus and why investing in the non-occupied areas offers a more favorable investment landscape for those looking to invest in real estate.
Cyprus is a beautiful Mediterranean island that attracts many foreign investors looking for real estate opportunities. However, the island has been divided since 1974, after a Turkish invasion that resulted in the occupation of the northern part of the island. This division has created two distinct areas: the non-occupied southern side, which is the internationally recognized Republic of Cyprus, which is a member of the EU, and the occupied northern territory, which is recognized only by Turkey.
The United Nations (UN) is present in Cyprus today to contribute to the maintenance and restoration of law and order. UN peacekeeping forces have been stationed in Cyprus to help maintain peace and stability in the region, and they continue to play an important role in ensuring the safety and security of the people of Cyprus. Through its peacekeeping mission, the UN works to support the efforts of the Cypriot authorities to build a better future for all residents.
A UN guard tower located in Cyprus.
This article will explain why investing in real estate in the non-occupied areas of Cyprus is a more favorable option for potential investors.
Political Stability
The non-occupied side of Cyprus is politically stable, with a functioning democratic government, a well-developed legal system, and a transparent business environment. In contrast, the occupied territory of Cyprus is subject to political instability and uncertainty due to its unrecognized status, which can affect investment decisions and outcomes. Moreover, sudden changes to laws and regulations on the occupied territory can raise questions about their legitimacy and may further deter investors from this area.
Legal Certainty
Investing in the non-occupied side of Cyprus comes with greater legal certainty, as the legal framework is transparent, reliable, and aligned with EU laws and regulations. In contrast, investing in the occupied territory of Cyprus may raise legal issues, as property rights and ownership may be disputed or unclear. This can create short and long term legal and financial risks for investors.
Economic Prospects
The non-occupied side of Cyprus offers greater economic potential, as it is part of the EU and benefits from access to a large market, resources, and funding opportunities. In contrast, the occupied territory of Cyprus is economically isolated, which can limit investment opportunities and access to markets and resources. The situation in the occupied territory has also led to the development of a dual economy, where the local Turkish Cypriot economy is largely dependent on Turkey.
Infrastructure Development
The non-occupied side of Cyprus has a modern and well-developed infrastructure that meets international standards, with a modern road network, efficient public transportation, and high-quality healthcare facilities. In contrast, the infrastructure on the occupied territory of Cyprus may be limited or outdated, which can affect the business environment and investment potential. In addition, the non-occupied side of Cyprus also has access to high-speed internet with fiber optics, further enhancing the area's attractiveness. On the other hand, the occupied territory has limited access to high-speed internet and other modern communication technologies, which can hinder growth and development.
International Recognition
The non-occupied side of Cyprus is recognized internationally as the legitimate Republic of Cyprus and benefits from the support of the EU and other international organizations. In contrast, the occupied territory of Cyprus is not recognized by the international community, which can limit opportunities for recognition and support from other countries and organizations.
While investing in the occupied territory of Cyprus may appear to offer some benefits, it is essential to be aware of the significant risks associated with it, including:
Political instability: The occupied territory of Cyprus is not recognized by the international community, and is subject to political instability and uncertainty, which can affect investment decisions and outcomes.
Legal issues: Investing in the occupied territory of Cyprus may raise legal issues, as the property rights and ownership may be disputed or unclear. This can create legal and financial risks for investors.
Medical issues: Due to the legal status, visitors and residents of the occupied territory of Cyprus may face difficulties with medical insurance coverage and are not eligible for EU health insurance card benefits.
Economic isolation: The occupied territory of Cyprus is economically isolated, which can limit investment opportunities and access to markets, resources, and funding.
Lack of infrastructure: The infrastructure on the occupied territory of Cyprus may be limited or outdated, which can affect the business environment and investment potential.
Limited recognition: The occupied territory of Cyprus is not recognized by the international community, which can limit the opportunities for recognition and support from other countries and organizations.
Reputational risk: Investing in the occupied territory of Cyprus may carry a reputational risk, as some investors and stakeholders may perceive it as supporting an illegal occupation and violating international law.
Lack of transparency: The occupied territory of Cyprus may have limited transparency in terms of business practices, financial reporting, and legal processes, which can create uncertainty and risk for investors.
Currency risk: The occupied territory of Cyprus uses the Turkish lira as its official currency, which may be subject to volatility and exchange rate risk, making it difficult to predict returns on investment.
Limited international support: The occupied territory of Cyprus is not recognized by the international community, which can limit access to international support and protection for investors in the case of disputes or conflicts.
Ultimately, investing in Cyprus can be a wise choice for many reasons, including its strategic location, favorable tax system, and supportive business environment. However, it's important to recognize the risks associated with investing in the occupied territory of Cyprus, which can include political instability, legal issues, and economic isolation, among others. By carefully weighing the potential risks and benefits, investors can make informed decisions and potentially reap significant rewards from real estate investments in the non-occupied side of Cyprus.
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