As Cyprus changes so do property preferences

3 mins read

Large companies and high-net-worth individuals who purchase houses and apartments to resell or rent them to third parties currently make up 20% of all property buyers in the US.

This trend has been progressing upward for the last two years, as people with the necessary financial resources buy properties intending to rent them back to their previous owners or put them back in the market in search of a tenant.

As financial crises become more frequent, an increasing number of people see the sale of their properties as an opportunity (a misnomer) to generate cash to finance the repayment of their loans.

At the same time, Generation Y (those born in the ‘80s and the ‘90s) has shown its preference towards renting properties rather than being homeowners and being in city centres with more amenities.

In the US, out of some 140 million housing units, approximately 80 million are family homes.

And, out of these family homes, some 15 million are being rented, with 300,000 homes in the hands of institutional investors.

The rest, in their majority, are owned by independent professionals.

While a relatively low number, it is enough to gauge in which direction the wind is blowing.

In Cyprus, the idea of owning a house still resonates with a lot of people.

However, we believe that the local market will progressively follow a similar trajectory to the US, as have most European countries.

A recent WiRE FS analysis of transactions in Nicosia over the past 18 months showed some 40% of the transaction value involved apartments, while two-thirds of these transactions took place in urban areas.

This indicates the increasing trend by mainly younger Cypriots to acquire apartments instead of houses (cheaper, smaller, closer to amenities) and many acquisitions being from investors looking to generate a rental income by tapping into the growing demand to rent.

Taking a step further and looking at data released by Eurostat, it becomes easier to see that owning a property is somewhat losing its appeal.

In 2009, property owners constituted 74.1% of the Cypriot market; in 2013, that number fell to 73% and in 2019 (latest available data), it dropped even further to 67.9%.

In fact, 2019 marked the first year where the percentage of property owners in Cyprus fell under the EU 27 average (69.8%).

With the country’s demographics shifting (fewer births, smaller families) and changes in social norms (increase in employment – more women in the workforce, greater need for letting out steam/ entertainment), this inevitably affects peoples’ housing needs. Nowadays, most people don’t want to go for a big house with a front lawn and a swimming pool.

They want a smaller, functional unit, close to amenities and with low running costs, as they expect to spend a significant amount of their time going out for coffee/ dinner and travelling.

Besides, the number of people who can afford these properties has significantly decreased compared to thirty years ago.

Big houses

We also observe this on the websites of asset management companies: big houses don’t sell for years, whilst apartments tend to be considerably more liquid.

In Cyprus, the population and households have significantly increased over the last thirty years (from 185,459 households in 1992 to 303,242 in 2011), which brought about many changes in the supply of residential property.

However, the main increase in supply has been to cater to overseas buyers rather than locals.

The native population has progressively aged and family size shrunk over the past two decades.

While we are waiting in anticipation to see what the 2021 census will show, the number of households (i.e., permanent residents) with one and two people in 1992 stood at 69,418 and 156,679, respectively, making up just 37% of all households.

In the 2011 census, that number jumped to 52%.

On the other hand, the number of households with four people or more fell from 45% in 1992 to 30% in 2011 (83,792 in 1992, 91,266 in 2011).

The layout of housing units being developed has also changed.

In the 2001 census, properties with up to 5 rooms (including kitchen and living room) made up 52% of the whole, while in 2011, that number went up to 61%.

During that same period, the largest percentage increase was found in houses with three and four rooms (18% and 23% respectively); this is in line with how households changed over time, with family size decreasing and young Cypriots having 1-2 kids.

The trends in the property market will keep following the accelerated demographic shifts. Therefore, the state, and the private sector, i.e., developers, banks, investors, need to make the necessary strategic steps to take account of these so that they are not placed in a position where they are forced to rush into decisions after the fact.


Pavlos Loizou, Managing Director, WiRE FS