Real estate in Cyprus: high interest rates and construction costs are having an impact.

The volume of real estate sales in Cyprus in the second quarter of 2023 reached €1.52 billion, and the market is showing signs of being affected by rising interest rates, increasing inflation, and the rising cost of construction materials. According to a report published this week by the Cyprus Council of Real Estate Agents, properties worth €1.7 billion were sold in each of the two previous quarters. In a statement accompanying the report, the council's president, Marinos Kineirou, emphasized that the real estate market has demonstrated its resilience but noted that "problems are accumulating and should not be underestimated by anyone." "Real estate as a whole makes a significant contribution to the Cypriot economy, and the government must find ways to support it in order to maintain momentum," he added.

According to the council's report, a total of €1.52 billion was generated from the sale of 5,974 properties in the second quarter of the year. The report indicates that, compared to the first quarter, both the volume of real estate sales and the number of transactions decreased during the corresponding period of the current year. Year-on-year, the transaction volume in the second quarter of 2023 is at the same level as in the corresponding quarter of 2022. However, the value of sold properties is significantly higher compared to last year, when it was €1.2 billion. It is important to note that Nicosia and Famagusta are the only districts where an increase in the value of sold properties was recorded in the second quarter compared to the first. In Nicosia, despite a decrease in the number of transactions (1,549), the value of sold properties increased (€299.8 million). On the other hand, in Famagusta, the increase in value (€59.7 million) was accompanied by a rise in the number of transactions (303).

It is interesting to note that there was a significant decline in Limassol, which ultimately led to a slowdown in the overall market dynamics in the second quarter. According to the data, the value of sold properties in Limassol decreased by €200 million compared to the first quarter, which reflected a reduction in both the volume and value of transactions. The real estate market in the districts of Paphos and Larnaca also experienced a downturn in the second quarter. The decline was more pronounced in the Paphos district, which lost ground compared to the previous quarter in both value and transaction volume.

Construction prices are rising, but production is also increasing. According to data published by the Statistical Service on Wednesday, prices in the construction sector increased by 6.5% year-on-year in the first quarter of 2023; however, on a quarterly basis, construction prices fell by 1.3%. This decline followed the historic peak of the producer price index in the fourth quarter of 2022. Specifically, the producer price index in construction reached 133.02 units in the first quarter of 2023, with 2015 set as the base year, indicating a decrease of 1.3% compared to the fourth quarter of 2022. This is the second-highest level in the history of the index, following the record value of 134.71 units recorded in the fourth quarter of 2022. Compared to the same quarter last year, the index increased by 6.5%. By project type, construction prices rose by 3.4%, while prices for engineering projects increased by 17.9% in the first quarter of 2023 compared to the corresponding quarter of 2022. In the same report, the Cyprus Statistical Service stated that production in construction grew by 5.5% in the first quarter of 2023 compared to the same period in 2022. Specifically, the construction production index reached 184.13 units in the first quarter of 2023, representing a 5.5% increase compared to the first quarter of 2022. It is worth noting that in the first quarter of 2022, the index fell to its lowest level since the second quarter of 2018. By project type, the production of construction work increased by 6.2%, while engineering projects rose by 0.7% in the first quarter of 2023 compared to the same period last year.