House prices up 4.7% due to construction costs

An accelerated increase in house prices was recorded in the second quarter of 2022, mainly due to rising construction costs, the Central Bank of Cyprus said in its quarterly property report.

The Central Bank House Price Index (CPI) for houses and apartments showed an increase in Q2, registering a quarterly increase of 1.7% compared to 1.1% in the previous quarter.

The index rose by 4.7% yearly compared to 3.2% in the previous quarter.

Rising house prices are due to increased construction costs, which is reflected in the increase in the prices of both apartments and houses, the Central Bank said.

Although on an annual basis, the increases in apartment prices are greater than those of houses in all districts, house prices are now also increasing.

“For the first time since the pandemic outbreak, all districts are showing year-over-year increases in both apartment and house prices, indicative of the upward trend in prices across the spectrum of the housing market,” the report said.

Demand in the real estate market during Q2 recorded an upward trend both domestically and from abroad, while there were signs of a downward trend in supply.

“The war in Ukraine has intensified inflationary pressures, with a significant impact on construction costs, but currently, this does not appear to have adversely affected demand.

“In the medium term, the increase in the cost of borrowing, due to the rise in interest rates, and the erosion of incomes due to inflationary pressures, are expected to reduce demand, but without necessarily reducing prices, which are currently characterised by increasing trends due to the construction cost.”