One wonders what is in store regarding real estate in Cyprus in the year ahead.
The past year saw a positive trend, with new sales showing a 35% increase in real estate contracts.
At the same time, it is worth noting the increase in the acquisition of real estate by foreign buyers by approximately 100% from the previous year.
It seems that the Cyprus real estate market has not been affected, notwithstanding the negative elements it is experiencing.
The negative points are the increasing interest rates on loans and the fast-increasing building cost.
Abolition of the Citizenship for Investment plan and the war in Ukraine has not had a noticeable effect on the market, and values seem to hold (save agricultural land in certain areas).
Interest by foreign buyers, although this sector involves only a small percentage of the total in sales, in terms of value, it surpasses 20% of the total.
Foreign demand props up the market, and the interest by shipping companies for locating here is noticeable, whereas other businesses, which include IT firms and more recently the relocation of Kassatly group from Lebanon, but more particularly the heavy interest from Israel (which ranges from the buying out of local hospitals, to large scale residential and office development, including Larnaca port) are positives.
We sometimes feel that the foreign market will buy up Cyprus, which may have a negative effect on Cypriots.
We are not against the sale to foreign demand, but it makes us wonder what the situation will be after, say, five years.
More importantly, what the effects on the local population (especially for affordable housing) will be?
The “misfortune” of other countries seems to have some positive effects on the Cypriot economy.
So, the Ukrainian war, be it that it has affected the tourist market, and the same country (Ukraine) has “exported” numerous businesses to the island (especially in IT).
Either by chance or based on good planning, the Cyprus tax system is a major attraction, as is the stable political situation and our EU membership.
In addition to foreign demand, 2022 was met with millions of redundancy payments to bank employees and others whose compensation funds found their way to the local real estate market (after buying new cars).
The foreign market’s interest will negatively affect the locals, including the high rents for student flats with international students leaving Cyprus due to non-affordability.
This is a stage of uncertainty, how local demand is affected by inflation and high electricity costs, but there is a glimpse of hope if and when Cyprus’ natural gas finds come into being.
Since foreign demand is primarily directed at Limassol (approximately 70%), it is evident that it most benefited (market activity and value increases) – but note negative effects on the locals already prevailing.
Whatever the government tries to alleviate the rental problem, it is just not enough.
In contrast, the announcement of the new Archbishop that the Church will develop student halls in Nicosia (after its 250-unit project in Limassol) is of some help.
So, 2023 will continue to sustain its brisk activity, mainly in urban areas.
To conclude, we expect that Limassol will continue its upward direction by approximately 5%, Nicosia an increase of around 3%, Larnaca by around 1-2%, Paphos by approximately 5% and Famagusta area (tourist region) by approximately 5%.
Although the Central Bank of Cyprus housing index records the negative effects on real estate due to increasing building costs and inflation/increasing interest rates, it mentions these are not necessarily reflected in reduced demand or a negative effect on prices.
It seems that the numerous infrastructural projects underway and foreign demand place a hedge against the negative factors.
Antonis Loizou FRICS – Antonis Loizou & Associates EPE – Real Estate Appraisers & Development Project Managers