Real estate sector depends on external factors

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The Cyprus economy has showcased its strong resilience, in a particularly difficult period recording, “comparatively one of the highest growth rates in the European Union,” said Dr George Mountis, CEO of Delfi Partners.

This was all the more remarkable considering the concerted efforts to contain inflation through strategic monetary policy decisions, which, according to Mountis, “seem to be succeeding in Cyprus.”

According to the latest forecasts by the European Commission, the Cypriot economy experienced a growth rate of 2.4 per cent in 2023. Furthermore, “it is estimated to grow at 2.8 per cent in 2024 and 3 per cent in 2025.”

On the flip side, inflation, which was a significant concern at 8.1 per cent in 2022, has seen a decrease to 3.9 per cent. Mountis optimistically notes that it “is expected to decrease further to 2.4 per cent in 2024 and 2.1 per cent in 2025.”

Given the broader economic and geopolitical developments, the forecasts for the Cypriot economy are positive. However, Mountis acknowledges the short-term sacrifices. “Of course, to achieve the containment of inflation, decisions were made that affect the citizens’ incomes in the short term,” he said.

A critical parameter in this equation is the interest rates, whose increase “exerts a significant pressure on the income of households.” Yet, there was a silver lining, Mountis maintained. “Given that the decisions of the European Central Bank are temporary and there is optimism that they will begin to change in 2024, possibly from June, it is likely that the de-escalation of interest rates will begin domestically as well.”

This potential development is crucial for facilitating the financial well-being of households and businesses, as well as the banks themselves. “A prolonged period of high-interest rates can lead, among other things, to the creation of new Non-Performing Loans,” he said.

On a positive note, “unemployment is at very low levels and we are gradually approaching full employment conditions.” This created another issue, that “many sectors face the problem of a lack of personnel, both specialised and non-specialised.”

The strategies for employing and attracting foreign labour that the government implements could, Mountis suggests, “in the coming years, see a general increase in the country’s population with what this entails in terms of economic development and consumption.”

Despite intense geopolitical instability Cyprus’ “real estate sector showed particular resilience in 2023 despite the expectation that 2024 will be a year of significant challenges.”

According to data of Delfi Analytics, sales contracts in 2023 increased by 16 per cent compared to 2022 and reached the highest level since 2008. A key driver for this development, Mountis points out, was “the increased demand from abroad, and especially from natural and legal persons outside Europe,” which compensated for the decrease in demand from Europeans.

The rise in the purchase prices of residential properties led many to turn to renting, resulting in a significant increase in rents, especially for apartments. “According to the latest data from the Central Bank of Cyprus, the prices of apartments in 2023 for the first time exceeded those of 2010,” said Mountis adding that this trend had led to an increase in properties purchased to rent, as part of an investment decision.

“Indeed, from our experience of providing property management services and also through Phaedrus Living, which deals with short-term leases, many Cypriots and foreigners are now investing in real estate to have a satisfactory return, either through long-term rental or through the short term,” he said.

Mountis emphasises the importance of having the right policies to maintain the dynamics of the real estate sector. “Actions are needed to maintain economic activity to cover the increased demand which in recent years exceeds the supply, further actions to create affordable housing projects, and specific policies to eliminate the problem of staff shortages which is delaying important building projects.”

The resilience of the real estate sector and its contribution to the sustainable development of the Cypriot economy will largely depend on international developments. “This does not mean that timely decisions should not be made to protect the sector and interested buyers,” said Mountis.

CM

Criminal cases filed against illegal real estate agents

The Cyprus Real Estate Agents Registration Council has issued a statement emphasizing its increased efforts to combat illegal real estate agents, which has resulted in its filing 167 criminal cases during 2023.

President Marinos Kineyirou emphasised the organization’s dedication to protect their profession and to safeguard unsuspecting individuals from potential fraud.

Over the past year, the Council has strengthened its team of inspectors both in quantity and quality to identify illicit activities and pursue legal action against individuals and entities, regardless of their legal status. These efforts have led to the registration of 167 criminal cases, highlighting the scale of the problem. The cases involve individuals and companies, traders, etc. suspected of breaking the Real Estate Agents Law of 2010 (L. 71(I)/2010).

Of these cases, 15 legal entities and 45 individuals have been prosecuted and convicted for illegal real estate brokering, with 35 cases resolved and several others pending.

The Council regularly updates its website with the names of convicted individuals and entities.

Kineyirou affirmed, “Our commitment to combat illegal real estate brokerage is ongoing, utilizing all available legal means. We are determined to address the issue of illegality, which profoundly affects the livelihoods of licensed real estate agents.”

He emphasized that the number of cases brought to court demonstrates their dedication beyond mere rhetoric.

“Our objective extends beyond preserving the integrity of our profession; we aim to protect unsuspecting individuals at risk of falling victim to fraudsters and losing their life savings,” Kineyirou concluded.

He urged the public to remain vigilant and request essential documents, such as annual licenses or professional identification, from individuals claiming to be real estate agents. To assist the public to verify individuals and companies, the Council maintains a list of licensed real estate agents on its website as well as properties offered by those agents.

Sales to EU nationals recovering?

As we reported on Monday, the total number of property sales rose by 14% in February compared with the same month last year.

Further analyses published by the Department of Lands and Surveys earlier today reveal that sales to EU nationals, which have been struggling for several months, may be on the road to recovery.

Market segment analysis

Property sales to the domestic (Cypriot) market

The total number of sales to the domestic (Cypriot) market February 2024 reached 772, a rise of 18% compared to the 656 achieved in the same month last year accounting for 60% of the total number of sales in the month.

Although the number of sales in Famagusta and Limassol fell by 39% and 4% respectively compared to last year, these falls were outweighed by rises of 60% in Paphos, 48% in Nicosia and 11% in Larnaca.

Domestic Property Sale Transactions – 2023/2024 Comparison (Jan-Feb)

In the first two months of this year sales to the domestic market rose by 19% compared to the same period last year. With the exception of Famagusta, which recorded a fall of 30%, sales in the remaining for districts have risen.

Property sales to the overseas market

The total number of property sales to the overseas market (both EU and non-EU citizens) in February 2024 rose 8% compared to February 2023, with sales rising in all districts with the exception of Limassol, where they fell 7%, and Paphos, where they fell 6%.

Sales in Famagusta, Nicosia, and Larnaca rose by 65%, 44%, and 34% respectively.

Foreign Property Sale Transactions – 2023/2024 Comparison (Jan-Feb)

In the first two months of this year sales to the overseas market have fallen by 10% compared to the same period last year.

Property sales to EU citizens

Sales to EU nationals rose 26% compared to February 2023 accounting for 11% of the total number of sales (1,284) achieved during the month and may be on the road to recovery following disappointing results over the past few months.

Sales rose in all districts with Famagusta up 55%, Nicosia and Limassol up 42%, Larnaca up 16%, and Paphos up 14%.

Property Sale Transactions EU Nationals – 2023/2024 Comparison (Jan-Feb)

In the first two months of this year sales to EU nationals have fallen by 3% compared to the same period last year.

Property sales to non-EU citizens

Sales to non-EU citizens in February 2024 rose 2% compared to February 2023 and accounted for 28% of the total number of sales (1,284) achieved during the month.

Surprisingly sales in Limassol and Paphos, the districts most popular with foreign buyers, fell by 14% and 13% respectively; possibly due to the higher prices in both districts. Famagusta and Larnaca, which are both less expensive, saw sales rise by 75% and 42% respectively, while sales in the Nicosia (the capital) rose 47%.

Property Sale Transactions Non-EU Nationals – 2023/2024 Comparison (Jan-Feb)

In the first two months of this year sales to non-EU nationals have fallen by 12% compared to the same period last year, with Limassol and Paphos reporting the largest falls.

Total Number of Sale Contracts Deposited 2008 to 2024 in the Second Month of Each Year

Apartments expected to boost housing supply

Several thousand apartments are anticipated to significantly boost the supply of housing as the construction of 541 apartment buildings is expected to be completed in the coming months.

The construction boom aims to address the pressing issue of housing scarcity due to significant increases in market prices and rents in recent years.

Various factors contribute to the challenge of acquiring a house or apartment, including the escalating costs of construction materials, inflation, supply chain disruptions, and interest rate hikes.

Many young couples cannot afford today’s high prices making homeownership a distant dream for many.

Speaking to Phileleftheros, Pavlos Loizou, CEO of Ask Wire explained “One of the primary reasons for the increase in residential property prices is the law of the market itself, which dictates that values rise when demand exceeds supply.

“Additionally, the inability of many to buy a house or apartment leads to renting, resulting in overheating of demand and rental market. Therefore, the burning question is how much the supply of residential properties will increase and when.”

Data collected and analysed by Ask Wire sheds light on construction trends across Cyprus. Since 2023, construction has been in full swing, with over 500 apartment buildings starting in various districts. Construction activity peaked in March, with more than 50 new projects starting.

Limassol, which is known for its high property prices, saw the start of 198 apartment building projects in 2023, with a significant surge in activity between March and May. In Nicosia, construction was distributed evenly throughout the year, with 165 new projects starting across all months.

Larnaca saw the start of 127 apartment building projects in 2023, catering to both local and foreign demand. July stood out as the busiest month with 16 projects getting underway.

Cyprus property sales up 14% in February

In February 2024, the total number of property sales contract deposited at Land Registry offices across Cyprus reached 1,284; an increase of 14% compared to the 1,131 contracts deposited in February 2023, according to official sales statistics published by the Department of Lands and Surveys.

Although sales fell in Famagusta and Limassol by 7% and 5% respectively, these falls were more than outweighed by rises of 47% in Nicosia, 22% in Larnaca, and 17% in Paphos. Property sales achieved in each of the five districts during February as follows:

  • Nicosia – 280
  • Famagusta – 69
  • Larnaca – 247
  • Limassol – 378
  • Paphos – 242

Sales in the first two months of 2024 reached 2,340; an increase of 9% compared to the first two months of 2023 – and the highest number on record since 2008 when 2,940 properties were sold in January and February.

Domestic Property Sale Transactions – 2023/2024 Comparison (Jan-Feb)

Cyprus Real Estate sector proved resilient in 2023

PwC Cyprus presented its annual report for the Cypriot real estate market, which includes important information about the sector’s performance in 2023.

The event titled, “Evolving landscape and the need for new policies and reforms,” was held on Thursday, February 29, 2024, at PwC’s Experience Center in Nicosia; in the presence of the Minister of Interior, Konstantinos Ioannou, who also delivered a presentation on the recently introduced housing policy, as well as other policies and reforms that are currently being considered.

Following the presentation of the annual report’s key findings, a panel discussion ensued with the participation of Mr Miltos Michaelas, CEO of Alpha Bank Cyprus, Mr Yiannis Misirlis, Chairman of the Cyprus Land and Building Developers Association, and Mr Dmitry Letov, Construction General Manager at Exness. The panel discussion was moderated by Constantinos Savvides, Director of Deals, Real Estate Advisory Services at PwC Cyprus.

PwC’s thorough analysis indicates that the Cypriot real estate market demonstrated remarkable resilience and flexibility during 2023. The total value of transactions reached €5.5bn, which appears to be at the same levels as in 2022.

Notably, transactions in the district of Larnaca recorded a 22% increase in transaction value terms with the district of Paphos recording a 4% YoY increase. The growth observed in these two districts appears to have offset the reduced transaction activity observed in the district of Limassol.

Residential real estate leads the market

During 2023, the transaction value of the residential property sector reached approximately €3.9 billion, representing a 1% decrease compared to 2022. From the 14,600 total transactions, 9,600 related to apartment sales and 5,000 related to houses. The residential property sector accounted for 69% (70% in 2022) of the total value of transactions across the sector. The performance of the sector was fuelled by a surging activity in the land segment, as transactions of land demonstrated an annual increase of 11% (2023: €1.3bn).

Foreign buyers continue to drive the market

A total of 6,900 properties across Cyprus were acquired by foreign buyers during 2023, recording an annual increase of 16% (2022: 5,928). The observed increase is coherent with the continued influx of foreign choosing to relocate their headquarters and staff to Cyprus. It is evident that the number of properties acquired by foreigners outnumbered each respective month of 2022 with the exception of November and December 2023, which experienced decreases of 16% and 18% respectively, which appears to be largely attributable to the outbreak of the Israel-Hamas war in early October.

Plummeting demand for high-end residential properties

The high-end residential property segment recorded a notable drop in 2023, with the analysis of transaction data of single residential properties with a price of greater-than or equal to €1.5mln, indicating a decrease of 26% compared to 2022.

The data suggests that during 2023, a total of 164 transactions were recorded in this segment, with the total value reaching €440mln. The contribution of this segment to the total value of transactions stood at merely 8%.

Regarding PwC’s report, Philippos Soseilos, CEO of PwC Cyprus, commented:

“The real estate sector in Cyprus is expected to play a significant role in the new economic model of our country, as encapsulated by Cyprus’ Vision 2035. The sector is going through its own transformation journey, with stakeholders recognising the need to continuously reinvent themselves, and change how they create, deliver and capture economic value – value that will enable Cyprus to continue attracting foreign direct investments – value that is sustainable and fit for the ongoing, as well as future needs of our country.”

To view PwC Cyprus’ 52-page report for the Cypriot real estate market in 2023 press here

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