Why real estate is a reliable investment - Financial Mirror

The inflation rate in Cyprus is decreasing, but it still remains high [at 6.7% in February]. Interest rates are low: 1.29% for personal deposits and 1.27% for business deposits.

Moreover, there are no other investment opportunities, as the Cyprus Stock Exchange shows a low return of about 2% per year, and there is also the option of purchasing government bonds.

The inflationary effect lies in the fact that it increases the cost of borrowed funds and, at the same time, raises the cost of production, making it more difficult to produce goods and services, including real estate, houses, and apartments.

Due to the war in Ukraine, the construction of new projects has been affected, with a decrease in the issuance of building permits due to rising costs.

However, demand remains stable, especially for unsold properties. According to the overall RICS index, the average income from real estate in Cyprus in 2022 was:

• Apartments 5.30%
• Home 2.80%
• Stores 5.70%
• Deposits 4.30%
• Offices 5.30%
• Vacation apartments 5.40%
• Vacation homes 2.70%

Sales data for 2022 shows that the real estate market is strong, with total sales nearly reaching 6 billion euros. According to the Cadastre Office, apartments are the top sellers, with total sales not only matching the levels of 2018 but exceeding them (20,799 sales in 2022 compared to 18,336 in 2018). Local buyers account for over 80%, with about 13% from the EU and 7% from other countries. According to the latest report from the Cadastre Office, the war in Ukraine did not have a significant impact on real estate prices in 2022, and contracts for deposits increased by approximately 30% [10,347 in 2021 and 13,409 in 2022].

Comparing 2021 to 2022, it is clear that the returns on apartments and houses have increased. Therefore, investing in real estate in 2023 is a reliable investment decision, and demand remains high, especially in Limassol, with apartment yields at 7% and between 4% to 6% for the rest of Cyprus, depending on the location and type of property.

It is not expected that property prices will be "corrected" downwards, as Cyprus has a strong economy and high demand for real estate; with a stable supply at the moment and a decrease in the number of building permits in 2023/2024, property prices are not only likely to remain stable but may even rise.

It is worth noting the significant increase in demand from foreign buyers in the Cypriot market from 2020 to 2022; sales to foreigners amounted to 2,432 units in 2020, 3,057 in 2021, and 4,123 in 2022.

In conclusion, regarding foreign buyers, it should be noted that Cyprus offers not only good investment opportunities in the real estate market. With a minimum investment of 300,000 euros, foreign buyers can stay in Cyprus, obtain residency permits, work, study, and enjoy more than 350 days of sunshine, as well as tax and other benefits. Additionally, the widespread use of the English language is a great advantage.

Author: Antonis Loizou F.R.I.C.S. - Antonis Loizou & Associates Ltd. - Real estate appraisers, real estate agents, and real estate consultants.