Changing trends in the Cypriot real estate market..

By analyzing the total number of sales contracts registered at the Land Registry for the first five months of each year, it is evident that the Cypriot real estate market in 2023 is experiencing its most active year since 2008. According to the same indicator, the Cypriot real estate market is experiencing its most foreign buyer dependent year since 2007. More specifically, foreign sales account for 46% of total sales in 2023, up from 43% in 2008. Continuing to analyze this data, the percentage of foreign sales in the Cyprus real estate market in 2023 is the highest except for the records of 2006 and 2007, when foreigners accounted for 49% and 53% annually, respectively. These figures underscore the significant reliance on foreign buyers in the current market and emphasize the continued interest and participation of international buyers in the Cyprus real estate sector.

Real estate prices

According to the Central Bank of Cyprus, residential property prices recorded annual increases in all regions. In particular, house prices rose by 2.9% in Nicosia, by 7.1% in Limassol, by 3.3% in Larnaca, by 10.4% in Paphos and by 4.2% in Famagusta. Apartment prices also increased strongly in all regions, by 4.3% in Nicosia, 9.3% in Limassol, 9.4% in Larnaca, 8.6% in Paphos and 5.1% in Famagusta. This strong price increase is mainly due to the policy of attracting residents, which has attracted about a thousand foreign companies in 2022, according to market data. These are mainly companies from Russia, Israel, Ukraine, UK, Lebanon and Belarus.

Increase in costs

At the same time, the increase in lending costs due to the increase in ECB interest rates does not seem to have had a significant impact on the overall demand for real estate, but on the other hand, it has had a significant impact on the demand for new housing loans. According to the Central Bank of Cyprus' Monetary and Financial Statistics publication, new housing loans in the fourth quarter of 2022 fell by 25.2% year-on-year.

Foreign investments in real estate

While foreign investment in the Cyprus real estate market has significant potential, it also carries inherent risks. Foreign investment is inherently volatile and is subject to many dynamic factors that are constantly changing. In essence, if foreign investment fails to maintain its momentum, there is a significant risk of price stabilization or decline. Thus, in order to assess the price trajectory, one needs to be confident in assessing the direction of inflation, interest rates, economic growth (Cyprus, EU, US, UK) and whether foreign investment will continue to be sustainable in the Cyprus market. Based on the overall economic situation, it seems that the most likely scenario is price stabilization in the beginning, accompanied by potential downward pressure on prices (less likely in the short term). However, a significant price decline on a large scale in the medium to long term is unlikely in light of the current economic conditions (barring major political events).

About the author

Haralambos Pitros holds a PhD in Real Estate Economics and is a member of the Royal Institution of Chartered Surveyors (MRICS), the European Real Estate Society (ERES) and the Cyprus Chamber of Science and Technology (ETEK). He is a real estate lecturer at the American University of Cyprus (AUCY) and an expert valuer at Zyprus Real Estate - property valuers and real estate agents. The views and opinions presented in this article are solely those of the author.