Residential property sales in Cyprus hit a 15-year record high in the second quarter of 2023, with a significant increase in prices, according to data released this week by the Central Bank of Cyprus.
In April-June 2023, the Residential Property Price Index (RPPI) registered a 1.5% increase, following a 2.1% increase in the previous quarter. This rise is attributed to the 0.7% growth in house prices and 3.1% increase in apartment prices.
On an annual basis, residential property prices increased by 7.4% in the second quarter of the year, compared to a rise of 7.7% in the previous quarter, with apartment prices increasing by 10.1% and houses by 5.6%.
The demand for property in Cyprus continues to rise, with local buyers making up the majority of transactions, according to data.
Increased demand, coupled with limited new housing supply, appears to be the driving force behind the RPPI growth. Despite the European Central Bank increasing key interest rates in the last few years, which reduced demand for mortgage loans, domestic demand for real estate remains on an upward trajectory. Construction costs have also stabilized this year.
The increase in foreign buyers is attributed to the framework of the Strategy for Attracting Companies to Activate and/or Expand their Activities in Cyprus (“headquartering policy”) and an increased number of students and other investors in the real estate market. Local demand seems to be driven by investments made for the purpose of renting, known as “buy-to-let.”
Cyprus property sales contracts saw a 26.5% year-on-year increase in the second quarter of 2023, marking a 15-year high. Specifically, the number of properties sold to foreign buyers increased by 38.5% year-on-year, while those sold to local buyers increased by 17.9% year-on-year.
However, following the ECB’s rate increases, new loans for property purchases decreased by 2.9% year-on-year in April-June 2023. The mortgage interest rate also increased, averaging at a rate of 4.28% during the same period.
Building permits for residential units showed a 13% decrease in the number of approvals in Q2, indicating a drop in construction activity.
Overall, the Cyprus property market continues to experience growth, driven by increased demand and limited supply.