Second Quarter of 2023 Witnesses Property Sales Surpassing 15-Year Record.

The property market in Cyprus experienced an unprecedented surge in sales during the second quarter of 2023, reaching a level not witnessed in 15 years, as indicated by a recent report from the Central Bank of Cyprus (CBC). Furthermore, property prices, particularly for apartments, have continued to rise, primarily driven by increased demand, which in turn has been fueled by the interest of foreign investors.

Analyzing the data, the CBC report highlights that during the second quarter of 2023, the Cyprus House Price Index (HPI) showed a 1.5 percent increase, compared to the 2.1 percent rise in the previous quarter. This growth is mainly attributed to a 0.7 percent increase in house prices and a significant 3.1 percent increase in apartment prices. On an annual basis, housing prices increased by 7.4 percent in the second quarter of 2023, compared to 7.7 percent in the first quarter, with apartment prices rising by 10.1 percent and house prices by 5.6 percent.

Most property transactions involved domestic buyers, but the largest annual increase in sales came from foreign investors. The surge in demand, coupled with limited new housing supply, appears to be the primary factor contributing to the increase in property prices during the second quarter of 2023, according to the Central Bank of Cyprus.

Furthermore, the report explains that the increased foreign demand can be mainly attributed to the headquartering policy, which continues to attract international companies to Cyprus, and the growing number of students and other investors in the real estate market. Meanwhile, increased domestic demand seems to be driven mainly by investment purposes, including buy-to-let properties.

The Central Bank of Cyprus also notes that, up until the second quarter of 2023, the increase in the European Central Bank’s key interest rates and the subsequent decrease in demand for housing loans do not seem to have significantly impacted domestic property demand, which continues to rise.

“Construction costs stabilizing in 2023, along with increased demand and limited supply, are the main drivers behind property price increases,” states the CBC.

During the second quarter of 2023, property prices in all regions of Cyprus saw quarterly increases. Specifically, in Nicosia, there was a 1.5 percent increase, 1.4 percent in Limassol, 2.7 percent in Larnaca, 2.7 percent in Paphos, and 2 percent in Famagusta.

Regarding annual changes in the House Price Index by region, increases were observed across all regions for the seventh consecutive quarter. In Nicosia, house prices increased by 4.4 percent, 10.1 percent in Limassol, 8.7 percent in Larnaca, 7.9 percent in Paphos, and 5.9 percent in Famagusta.

On a quarterly basis, apartment prices increased in all regions except Limassol, which saw a marginal decrease. Additionally, in Nicosia, apartment prices increased by 1.8 percent, 1.7 percent in Larnaca, 0.9 percent in Paphos, and 1.9 percent in Famagusta, while Limassol experienced a slight decline of 0.4 percent.

Year-over-year, apartment prices increased in all regions for the eighth consecutive quarter. In Nicosia, apartment prices rose by 4.2 percent, 13.9 percent in Limassol, 13.1 percent in Larnaca, 16.3 percent in Paphos, and 2.5 percent in Famagusta, compared to the same quarter in 2022.

The Central Bank of Cyprus also reported a significant increase in the growth of property transactions during the second quarter of 2023, marking a 26.5 percent increase on an annual basis. A total of 4,115 transactions were recorded during this period, compared to 3,254 in the second quarter of 2022, reaching the highest level in over a decade. Notably, there was a 38.5 percent increase in the number of properties sold to foreign buyers, with 1,871 transactions compared to 1,351 in the second quarter of 2022. In contrast, the number of properties sold to domestic buyers increased by 17.9 percent on an annual basis, with 2,244 transactions compared to 1,903 in the second quarter of 2022.

Meanwhile, following the increase in lending interest rates by the European Central Bank, new housing loans for property purchases in the second quarter of 2023 decreased by 2.9 percent on an annual basis. The average interest rate for housing loans during the second quarter of 2023 continued to rise, reaching 4.28 percent, compared to 3.74 percent in the first quarter of 2023 and 2.27 percent in the second quarter of 2022. The Central Bank of Cyprus also noted that lending criteria became stricter compared to the previous quarter. However, these developments do not seem to have substantially affected the overall demand for properties in Cyprus until the second quarter of 2023, according to the Central Bank.

Finally, the Central Bank of Cyprus highlighted that, according to the state’s statistical service, the number of residential buildings for which construction permits were approved decreased by 13 percent, falling from 906 in the April-May 2022 period to 788 in the same period of 2023. This decrease may indicate a decline in construction activity during this time.

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