Foreign investment and increased local demand keep markets on a growth path
As Europe’s real estate leaders grapple with a market burdened by inflationary pressures and rising interest rates, the property sectors in Cyprus, Greece and Serbia are maintaining a positive outlook, offering attractive opportunities for both international and local investors.
In Cyprus and Greece, foreign investment continues to play a pivotal role in the residential market, with strong demand from local buyers further bolstering the sector, while Serbia bounces back from a two-year slump.
Simultaneously, the demand for Grade A office spaces remains robust in all three countries, signaling the return of confidence in the commercial real estate market.
Residential Market
According to Eurostat, in the first quarter of 2024, the House Price Index (HPI) revealed that prices decreased by 0.4% in the Eurozone, while they increased by 1.3% across the EU compared to the same quarter last year.
The Central Bank of Cyprus reported a slight deceleration in the HPI for houses and apartments in the first quarter of 2024.
However, on an annual basis, house prices rose by 7.8% in Q1 2024, compared to a 8.3% increase in Q4 2023. Apartment prices surged by 13.9%, while house prices increased by 4.7% during the same period.
High-end residential properties continued to drive the Cypriot market, with total sales reaching €2 bln — a trend that has persisted into 2024.
Foreign buyers acquired 6,900 properties in 2023, marking a 16% increase from the 5,928 properties purchased in 2022, as the Cyprus Residency Programme, known as the “Golden Visa,” has been a significant driver of this foreign investment.
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Looking ahead, an anticipated decrease in interest rates by the European Central Bank is expected to lower rates on the island, encouraging more locals to enter the market.
A similar scenario is playing out in Greece.
According to the Greek central bank, in the first quarter of 2024, the average price for houses in urban markets have been on the rise.
The southern suburbs of Athens reached €3,750 per sq.m., the highest in the country.
The biggest year-on-year increase was recorded in Piraeus, where prices surged by 28.9%. Nationally, apartment prices experienced an annual growth rate of 10.4%, with regional variations: Athens saw a 9.4% increase, Thessaloniki 12.2%, other cities 10.3%, and other areas of Greece 12.1%.
Demand for office space
The demand for business space in Cyprus has reached its highest levels in five years, recovering from the effects of COVID-19. Increased foreign investment has boosted demand for office space, particularly modern, Grade A offices, which are expected to remain in high demand throughout 2024.
Nationwide, rental prices increased by 8.5% year-on-year in the first quarter of 2024 and are about 10% higher than in 2019. Office rents, which hit their lowest point in Q1 2022, are now about 14% higher.
Limassol and Larnaca are leading the way, while the capital, Nicosia, is showing steady recovery. The ongoing transition from older buildings to state-of-the-art, energy-efficient facilities is driving the demand for modern office spaces in Cyprus.
Despite the current supply and upcoming projects, office rents are expected to remain relatively high due to sustained demand and new standards.
The office property market in Cyprus is especially attractive, with global companies setting up local operations due to the island’s high quality of life, strategic location and favorable tax system.
Danos recently carried out a valuation survey, facilitating the sale of office facilities valued at around €40 mln to a Real Estate Investment Company (REIC) from Greece.
In Greece, the market fundamentals in the office sector remain strong, moving in the opposite direction of other European markets.
Demand for Class A office space continues to be robust, driven by a growing national economy and an influx of new investors seeking assets that meet ESG criteria. There is a backlog of new projects for certified offices, which will partially satisfy the ongoing demand.
According to Danos Group’s data, 75% of rental agreements concern high-end buildings that offer quality facilities and high energy efficiency.
Athens remains one of the most affordable capitals in Europe for renting modern office spaces, while Thessaloniki has become a prime destination for multinational companies such as Pfizer, Deloitte and Chubb.
Even Crete, a market less dynamic than the major cities, provides a stable environment with significant growth potential, particularly in Chania and Heraklion, with impressive yields of 6-6.5%.
Serbia demand grows
Turning to Serbia, the commercial real estate market is benefiting from heightened demand for office space, retail properties, and an increase in tourist arrivals.
The country’s residential market is also picking up after a six-quarter downward trend, driven by a surge in buyer activity as inflation pressures and interest rates begin to ease.
Compared to the same period last year, apartment prices in Serbia increased by 4.74% in Q1 2024, reflecting the increased demand.
Serbia’s office market continues to grow, with a “prime yield” of 8.5% in the first half of 2024, offering attractive investment opportunities. The availability of office space remains low, with the vacancy rate standing at 6.3% for Class A buildings.
Meanwhile, the tourism sector is also experiencing significant growth. In May 2024, Serbia saw a 16.9% increase in tourist arrivals and a 14.0% rise in overnight stays compared to May 2023.
Serbia’s tourism market is expected to generate substantial revenue in the coming years, prompting major hotel chains like Swissotel and Marriott International to invest in new projects in Belgrade.
With considerable support for investors from its government, Serbia is poised to significantly boost its hospitality sector, aligning with its growing reputation as a diverse and attractive tourist destination.
In summary, despite challenges lying ahead, Cyprus, Greece and Serbia are defying trends with strong growth across both residential and commercial sectors. At Danos International Property Consultants and Valuers we strongly urge investors to make a move sooner than later, if they want to cash in on opportunities offered in these promising markets.
Kyriacos Kiliaris is Chief Marketing Officer at Danos International Property Consultants & Valuers
www.danos.com.cy www.danos-group.com
