Real estate is the ultimate Asset and nobody knows real estate better than Pavlos Loizou, the CEO of Ask Wire. We asked everything from real estate to AI, food and the Royal Family. He delivered perfectly.
Where would you invest 1 million euros in real estate right now (any country), and why?
I would invest in an ETF, i.e. a financial instrument that invests in funds that own real estate. In this way I would maximise my diversification in terms of geography and asset classes, plus have the necessary liquidity/ ability to exit easily and with no agency costs, capital gains tax, etc. In terms of physical real estate, I would get some leverage (loan) and buy a small apartment building in Nicosia, so that I can be hands-on (and not have management expenses) – prices are approachable, demand is stable, etc.
As you correctly predicted, a lot of real estate companies, worldwide, saw their valuations drop and are now in some serious problems. What’s next for them?
Many real estate companies, especially those that own real estate for income-producing purposes, are faced with increased financing costs, i.e. their borrowing costs have increased, and, as income returns from bonds have increased, investors demand higher returns to own their shares. For example, a company whose real estate generated 6% income return and had borrowing costs of 2% had a net income return of 4% which was attractive in a low-yield environment where government bonds were trading at 1.5-2.0%. Now, borrowing costs have increased to (say) 5% so that net income return is 1%. At the same time, the yield of government bonds is 4%. Thus, the purchase price needs to drop so that the numbers make sense. If the purchase price decreases by 50%, then the income return increases to 12%, i.e. 6/50, which, minus borrowing costs of 5%, gives you a net of 7%. This compares favourably with the new government bond yields.
The impact of the above is that many commercial loans will default, with banks and shadow financing companies taking the hit. At the same time however, we are faced with structural changes in the economy such as work from home – less demand for city centre office space – and online retail – less demand for high-street shops and malls.
The hottest talk right now is AI. Everybody is talking, investing, testing, and predicting about AI. How AI can affect real estate and does Ask-Wire have any use for it?
AI will provide increased transparency in real estate in terms of pricing, information, etc. It will also help buyers/sellers interact easier, with agents playing a more meaningful role than that of “gatekeeper of information”. With more data/information becoming available, leveraging tools to automate aspects of real estate-related transactions is an obvious way forward. However, as the sector tends to be slow to adapt, I think that we won’t see big leaps forward.
At Ask Wire, we are leveraging AI and machine learning for lead generation for our clients. We identify where construction activity starts, so we inform suppliers of construction materials, furniture companies, and others so that they reach out to the developer/contractor to provide them with their products and services. We are now working on integrating a language model that will autogenerate reports on the Cypriot and Greek real estate markets, e.g. provide a report on apartments in Germasogia, Limassol including transaction volume and prices, as well as ten properties currently on the market for under €400k.
Which country is overestimated in terms of return on investment from real estate assets?
My experience is limited to Greece, Cyprus and Romania. Cyprus real estate concerns me in terms of affordability by local companies and individuals. This is less of a real estate problem and more of a societal, whereby we are causing structural imbalances by not controlling the inflow of capital into the economy in productive sectors rather than the conversion of bricks into high-end apartments.
Your honest opinion on all the Towers and big developments we see all over Cyprus.
The rise in tower constructions and big developments in Cyprus appears to be more about satisfying the egos of the wealthy than meeting societal needs. This seems reminiscent of the castles and towers of the past.
Which architect would you choose to build your dream house?
I would never build my own home. Life is too short to deal with builders.
What is the single best piece of land in Cyprus that has the biggest potential and is currently not built?
The area on the east side of Limassol, near Moni power station. It has easy access to Nicosia and Larnaca, with plenty of land for development in the proximate villages of Pareklissia, Pyrgos, Monagrouli and Pentakomo.
What is the endgame for all the non-performing loans Saga in Cyprus? how will all this end?
We are “playing” in the second half of this game. Most commercial loans have been processed, with those of individual borrowers and small businesses underway in earnest. Many will hand in their fields/ lands/ second homes to pay these off, whilst others will downsize. I don’t see another way out.
Talking about “social housing planning”, should the government, any government, rent or build?
The role of government is to provide access to housing for all, which includes social housing. Governments should take this role seriously, by building and renting – not selling – real estate. Governments and the Church are the only two organisations that can view time as “eternal”, so they should provide, for example, nurses with affordable housing near their place of employment. Once this employment ends, then they should hand over the apartment to, say, another nurse.
What is the best and worst thing a house owner can do to improve or worsen, respectively, the value of its property?
The best way to improve a property’s value is to have all permits and documents in order. Conversely, making unsupervised additions or alterations to a building could create a ‘Frankenstein’ building, reducing its value.
Which is the best-looking building in Cyprus right now?
Belabais Abbey in Kyrenia is a personal favourite of mine.
How is Ask Wire changing the local real estate market?
Ask Wire aims to bring transparency to the real estate market. We believe that everyone should have access to detailed information and reliable data about real estate; we have collected information for the entire island on earthquakes, soil quality, etc, mapped all transactions from January 2016 onwards (and update them monthly), and monitor 22,000 listings/ asking prices daily. This allows us to provide clients with easy access to environmental data and to transactions/ asking prices, which helps that monitor what is happening in the real estate market with complete transparency. It also helps them benchmark what price to acquire a property at and what they could expect to sell it for. In all, by having this information they can make more robust and informed decisions to maximise profit and automate processes.
Ok, enough with real estate. Let’s go casual. Cheese platter or souvlakia?
Souvlakia. Always.
Business suit or jeans?
Jeans.
Pinterest or Instagram?
Neither – LinkedIn (or physical newspaper or the Economist)
Gym with others or running alone?
Gym alone or walking alone.
Harry-Megan or the Royal family?
Me eating souvlakia, watching Star Trek.
Breaking Bad or the Sopranos?
The Simpsons.
Biden, Trump or please anyone else?
Anyone else.
A Tesla, a Nissan GTR, or public transport?
Tesla. Although I prefer a classic Landrover.
Live music or vinyl records?
Podcasts.
Mountain or beach?
Mountain.
Pavlos Loizou is the CEO of Ask Wire, a real estate intelligence firm where analytics meet experience and insights.
