Cyprus real estate market soars as foreign buyers contribute to rising demand

During the first quarter of 2023, the Cyprus real estate market is witnessing an unparalleled upswing, with increasing property prices and growing demand. The article explores the causes that have contributed to this astonishing growth, as well as the crucial role that foreign buyers have had in stimulating housing demand.

The Cyprus real estate market has recently seen a significant recovery, with property values reaching new highs, particularly in the apartment category. This increase is mostly due to an increase in demand, which has considerably aided the growth of the housing sector. The House Price Index (HPI) has seen a significant acceleration compared to previous quarters, according to data issued by the Central Bank of Cyprus (CBC) in the first quarter of 2023, indicating a good prognosis for the real estate market.

Rising demand and foreign buyers' impact

The Cyprus real estate market has been on an increasing trend in the first quarter of 2023, as evidenced by indicators for property sales and demand. The Department of Land and Surveys (DLS) data shows a tremendous annual increase in home demand, confirming the market's growth pace. Foreign purchasers contributed significantly to this increase in demand, accounting for roughly half of all buyers in 2022 and the first quarter of 2023.

Cyprus's appeal for international purchasers can be ascribed to a number of factors, the most significant of which being the lucrative incentives granted by the country. Notably, the headquarters policy has been critical in drawing specialists from Russia, Israel, Ukraine, the United Kingdom, Lebanon, and Belarus. These incentives have increased foreign interest in the Cyprus real estate market, resulting in an increase in property transactions.

Price growth and construction costs

The rate of increase in construction costs appears to have stabilized compared to the period of 2021-2022 when higher growth rates were recorded. During the first quarter of 2023, the House Price Index (HPI) for districts like Limassol and Larnaca experienced significant acceleration, while the Paphos district witnessed a slightly slowing trend. However, despite the slowdown, the rate of increase in property prices in Paphos remained high.

The House Price Index recorded a quarterly increase of 2.1% during the first quarter of 2023, compared to 1.6% in the previous quarter. The rise in the HPI can be attributed to a 2.3% increase in apartment prices and a 1.7% increase in house prices compared to the previous quarter.

On an annual basis, there was a 7.7% increase in house prices during the first quarter of 2023, compared to 6.6% in the fourth quarter of 2022. Apartment prices exhibited an even higher annual increase of 8.4%, while house prices rose by 6.6% during the same period.

Market resilience and structural factors

Surprisingly, the present rise in property prices reflects a shift in market dynamics from the prior year. While the 2022 housing price increase was mostly driven by rising costs of construction, the first quarter of 2023 reveals that the present trend is primarily driven by rising demand. According to data from the Department of Land and Surveys sales papers, buyers are more interested in acquiring properties for primary residence or development projects rather than for speculative motives.

Additionally, despite the rise in housing loan interest rates due to the monetary policy of the European Central Bank (ECB), the overall demand for properties in Cyprus seems to have remained resilient until the first quarter of 2023. This resilience underscores the attractiveness of the Cyprus property market to both domestic and foreign buyers.

Regional insights

During the first quarter of 2023, housing prices in all districts of Cyprus recorded a quarterly increase. Nicosia saw a rise of 1.3%, Limassol 2.9%, Larnaca 2.6%, Famagusta 2.3%, and Paphos 0.3%.

On an annual basis, all districts registered an increase in housing prices for the sixth consecutive quarter. Limassol, Larnaca, and Paphos exhibited relatively higher rates of increase, possibly driven by the foreign buyer interest due to the headquartering policy.

The Cyprus real estate market grew rapidly in the first quarter of 2023, owing to growing demand and strong participation from overseas buyers. The rise in housing prices, particularly in the apartment sector, indicates the market's resiliency and appeal to both domestic and international investors. The ongoing expansion and support from the government make Cyprus an attractive destination for real estate investment in the near future.