The increase in interest rates has not affected real estate price tags, as hiking construction costs and healthy investor demand looking for alternatives to low returns from savings keep prices buoyant.
The course of interest rates in the future is expected to determine property values, as an increase in the cost of borrowing could deter buyer interest.
Before the summer, the key rate was negative; there have already been three increases to 2%, while the European Central Bank is expected to push rates even higher during the meeting of its Governing Council on 15 December.
This will make access to credit more difficult, as borrowing will be considerably more expensive, according to ECB analysts.
“Mortgage interest rates rose significantly in the first half of this year, which may particularly affect house prices and real estate investment,” European Central Bank researchers were quoted by Phileleftheros daily.
“In particular, at a time when the ECB is raising interest rates, the models suggest that a one percentage point increase in mortgage rates could lead to a drop in prices of around 9% after two years,” the researchers note.
However, house prices are still high.
A 93 sqm apartment in Kaimakli (Nicosia) is for sale at €160,000, and a 130 sqm one is sold at €280,000.
An apartment of 72 sqm in Nicosia’s more prestigious Strovolos has a price tag of €145,000, and an 85 sqm flat in the same area is going for €220,000, while an apartment of 100 sqm in Engomi is sold at €340,000.
The Phileleftheros data refers to old apartments and not newly built ones.
House prices have yet to come down. For example, a 240 sqm detached house in Strovolos is €375,000, and a 233 sqm house in Lakatamia sells at €395,000.
In Limassol, a new apartment of 115 sqm in Agios Tychonas, on the outskirts of the city, sells for €470,000, while in the centre, a 97 sqm flat costs €240,000 and a 112 sqm in the tourist area of Moutayiaka is €1.35 mln.
Buying a new house in the centre of Limassol is only affordable for high-end clients, as the cheapest house has a price tag of €700,000, with the majority exceeding €1 mln.