The Finance Ministry has painted a sombre picture for the local real estate sector should the crisis in the Middle East be prolonged, contrary to the outlook issued by the Central Bank, which anticipates moderate growth.
According to the head of the economic policy unit of the Finance Ministry, Dionysis Dionysiou, the authority estimates the ongoing war in Gaza is “not only intensifying the uncertainty in the region but the situation is also expected to take a toll on international energy prices and supply chains”.
In relation to the real estate market, concerns are focused on the possible time frame of the crisis in the Middle East.
The Finance Ministry’s official argued the negative impact of the war in Gaza was sharply felt at the earlier stages of the conflict, but things stabilised soon after.
“At the present stage, Israeli investors’ steady investment activity in the real estate sector is visible; however, the scenario of a prolonged crisis in the region, the property market, will be negatively affected,” said Dionysiou.
“Israelis make up a significant share of the foreign buyer market”.
The Central Bank of Cyprus (CBC) does not appear to be on the same page as the Finance Ministry, noting slight optimism for the sector in its report.
According to the CBC, Cypriot companies of Israeli interests established on the island thanks to incentives to attract international companies.
These companies, noted the CBC, have invested in real estate and are not expected to carry out mass real estate sales.
Due to Cyprus’ security and political stability, the CBC does not rule out the continued demand for real estate from Israeli citizens and companies.
It is also reported that Israelis are making exploratory moves, both for commercial and residential properties, with a shift for the time being to property rentals.
Last week, the ECB warned that property companies in the eurozone are suffering from mounting losses, and some will struggle to service their debts, which have risen to levels higher than before the 2008 financial crisis.
The losses, cited by the ECB, stem from significantly higher financing costs, falling commercial property values, lower rental income, and growing concerns about the energy efficiency of buildings.
However, the latest Land Registry data on sales documents for the first 10 months of 2023 reflect the resilience of the real estate sector, although players have expressed concern over market overheating.
According to the data, the first ten months were the best for the industry since 2008, when sales reached 13,261 units.
Ten-month sales documents reached 12,825 units, from 10,781 last year, marking an increase of 36.2%.