The island’s residential market is cooling down for the first time in four years, despite significant annual increases in property prices and rents across Cyprus.
Recent quarterly data suggest that this slowdown is evident in the stabilisation, and in some cases, slight decline, of house and apartment prices.
For the first time since 2020, the quarter-on-quarter increase in property prices is hovering close to 0%, with some areas even experiencing negative growth.
In Limassol, the island’s priciest city, apartment prices dropped by 0.5% in Q2 2024 compared to Q1, a notable shift from the 2% increase observed in Q1 from the previous quarter. This follows an even steeper 8% rise in the last quarter of 2023, indicating that the market’s momentum is slowing down.
Across Cyprus, apartment prices have shown signs of stabilisation over the past two quarters. Since Q2 2021, when the world began recovering from the coronavirus pandemic, apartment prices in Cyprus had been steadily rising, with quarterly increases ranging from 1% to 5% up to the end of last year.
However, in the past three quarters, these increases have been below 1%, with Q2 2024 seeing almost no change, signaling a significant cooling in the market.
In Limassol, the cooling trend is not limited to apartments. The cost of buying a house also edged down by just under a half of percentage point in Q2 2024 compared to Q1, following a period of stabilisation earlier in the year.
Over the past few years, house prices in Limassol have fluctuated, with quarterly increases ranging from minimal to 5%, peaking in mid-2023. The recent decrease suggests that the market may be entering a period of more subdued growth.
Larnaca stands out as the only district in Cyprus that has consistently seen price growth over the past three years, with quarterly increases fluctuating between 1% and 3%.
In Q2 2024, apartment prices in the coastal town notched up by 0.5% compared to the previous quarter, following a 1% increase in Q1. However, prices in all other districts have remained stable, further indicating a broader market slowdown.
Rentals: A Mixed Picture
The rental market across Cyprus, although hinting towards a cooldown, presents a mixed picture.
Overall, rental prices increased by 1% in Q2 2024, compared to the previous quarter, largely driven by significant rises in Paphos and Limassol.
Paphos saw a 5% increase in rental prices, while Limassol recorded a 3% rise. In contrast, rents in other districts, including the capital Nicosia, remained stable.
In Nicosia, rental prices have relatively stabilised, with a 3% increase in Q1 2024 followed by no change in Q2.
Limassol, however, continues to see upward pressure on rents.
Apartment rental prices in Limassol have been on the rise since 2021, with a 2% increase in Q2 2024, although this is a moderation from the staggering 10% rise in Q2 2023.
Meanwhile, rents for houses across the island have remained stable, suggesting a divergence in demand dynamics between different types of residential units.
Rental Market Pressures
Despite the cooling in property prices, the rental market remains under pressure, particularly in Limassol.
According to data from Danos International Property Consultants and Valuers, renting a one-bedroom flat in Limassol costs a minimum €850 per month, with two-bedroom flats starting at €1,300. Renting a three-bedroom flat in the district is becoming increasingly unaffordable for the average Cypriot wage, with rents around €1,700 per month.
In Nicosia, rental prices for a one-bedroom flat range from €550 to €650, while a two-bedroom flat costs at least €750 per month. However, prices vary significantly depending on location, with uptown areas like Engomi commanding higher rents.
Larnaca and Paphos offer more affordable rental options, but the increasing interest from foreign investors and high-tech companies in these coastal towns could drive up rents in the near future.
Annual Changes and Market Outlook
On an annual basis, the prices of apartments in Q2 2024 grew by 3.5%, while house prices remained stable. This annual growth reflects the sustained demand for housing in Cyprus, driven in part by foreign buyers.
In 2023, foreign buyers acquired 6,900 properties, marking a 16% increase from the 5,928 properties purchased in 2022.
High-end residential properties, particularly in Limassol, are expected to continue driving the market in 2024.
Limassol is likely to remain the dominant player in the luxury apartment and high-rise seafront tower segments, while Nicosia is expected to maintain a more modest yet stable market, attracting students, business owners, and government workers.
However, the cooling trend in the quarterly data could signal a shift in the market dynamics.
As supply steps up and EU interest rates begin to drop, local buyers may find more opportunities in the market, potentially balancing the high prices and interest rates that have previously outpaced Cypriot buyers.
Kyriacos Kiliaris is Chief Marketing Officer at Danos International Property Consultants & Valuers www.danos.com.cy www.danos-group.com
