Home prices drop, boost from local demand and state schemes

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Residential property prices dropped a marginal 0.2% in the fourth quarter of 2020, its second marginal consecutive quarterly reduction, with the government’s interest rate subsidy scheme offsetting the negative impact of the COVID-19 pandemic.

According to the Residential Property Price Index (RPPI), compiled by the Central Bank of Cyprus, residential properties in the fourth quarter of 2020 recorded a quarterly reduction of 0.2%, following a decline of 0.4% in the previous quarter.

On an annual basis, the index marked a slowdown showing in increase of 0.8% in Q4, compared with a rise of 1.2% in the previous quarter.

The residential property sector found itself in dire straits due to the COVID-19 pandemic and a drastic reduction in demand due to the termination of the Cyprus Investment Scheme, the central bank said in a memo.

However, as the CBC noted, “the state scheme for interest subsidisation for housing loans seems to have boosted domestic residential demand, particularly in 2020”.

CBC also noted that recent years showed a change in customer preference to cheaper or smaller residences resulting in an increase demand for apartments over houses.

According to the CBC, house prices dropped 0.5% quarter on quarter as opposed to apartment prices which rose by 0.7% in the last quarter of 2020. Compared with the fourth quarter of 2019, house prices declined marginally by 0.1%, while apartment prices rose by 2.7%.

“The restrictions imposed in 2020 due to the COVID pandemic, as well as the termination of the Citizenship for Investment Scheme inevitably affected transactions in the real estate sector,” the CBC said.

It added that the real estate market, despite the decline in demand from foreign buyers, was boosted by domestic demand, facilitated by the government’s interest rate subsidy scheme.