Scary rents for scary times

With the constant demand for residential units, the rental situation has been a concern for some time, to the extent that it affects the Cypriot market, especially middle to lower-income groups.

The large increase in building material costs, the expected rise of interest rates, the changing attitudes regarding abuse of the rental market, and the influx of foreign demand have pushed rents in towns (initially Limassol, Larnaca, Paphos and now Nicosia) to unattainable levels for Cypriots.

Foreign demand appears to be affordable or manageable to the extent that great demand in one town is directed to another.

Notwithstanding the distance, the availability or shortage of foreign schools has become a negative factor which is most unhealthy, especially regarding the travel time for students.

On the one hand, we expected the departure of many Russian nationals due to the war to ease the situation.

Still, on the other, we have an influx of Ukraine-based companies to fill the void, regardless of whether these Ukrainians are not as financially comfortable as the Russians are.

The situation is not as bad as in other European countries (e.g., the UK), where Russian children are taken out of schools and moved to another area or country, with the children not knowing the reasons.

Cyprus seems to have a lucky charm, where the misfortune of others helps our small island.

Since the 1974 Turkish invasion, we had the unfortunate situation of the civil war in Lebanon repeating itself, with its near bankruptcy status, and has directed demand from wealthy Lebanese to Cyprus.

Then we had the civil war and break-up of Yugoslavia (with Serbs mainly coming over), then the Russians with the collapse of the USSR, and now the war in Ukraine.

Also, Israeli investors’ never-ending interest in Cyprus, always looking for investment opportunities – such as the recent acquisition of private hospitals, investment in the Larnaca marina, and high-rise office and building blocks in Nicosia.

We have the new operation of the Limassol casino, which requires 5,000 employees (mainly foreign staff since locals are not particularly interested in working hard and at odd hours) and, more recently, the 9,000 new applications from foreign business executives adding to local rent demand.

Add to this the increase in student residences which is expected to rise by 50% over the next 2-3 years, not just in Nicosia and the centre of Limassol, but also in Paphos with the creation of new campuses, such as the branch of the American University of Beirut (AUB).

Newcomers

Shipping, one of Cyprus’ main revenue-earning sectors, does not seem to be affected by the Ukrainian war or the departure of Russian companies, but then we have an equal number of new shipping registrations not causing a major loss overall.

Having said this, the refugees and asylum seekers, estimated by some at 6% of the total population, should not be ignored since they form part of the “local” demand with the €300 per person monthly subsidy generating new income for some greedy landlords.

Hotels are allegedly hosting around 30,000 Ukrainians and rising, and from our experience, they are highly educated and well-behaved, which might form the basis of future business.

So far, we have at least 14,000 newcomers, primarily higher-income, seeking similar accommodation to the locals (mainly apartments in towns).

If we take up this number of 14,000 (in the casino and foreign executives), we may end up in demand for at least 3,000 apartments, which we cannot supply.

Nicosia is the last town to benefit from this increase in demand.

In a recent let in Nicosia for a couple of 2-bedroom apartments and after placing a media advert, we had eight enquiries mainly from foreign people and were duly let within 4 hours from the advert publication.

This also affects the student demand and those from the middle- or lower-income group.

Demand is pushing prices up, but at the same time, it causes difficulties for Cypriots.

Israeli investors have foreseen this accommodation shortage and have acquired large land holdings at the Phasouri and casino area, where large projects are under development but will still not be enough.

If we refer to the more popular 2-bedroom apartments, the average rentals for town units are recorded as follows (rents p.m. + common expenses). Good news for property owners, but social problems will follow.