10.01.2023
Rising mortgage rates have shattered dreams of owning a home, leaving many in a 2022 trap as rents rise above what families pay each month on a home loan.
Mortgage interest rates could reach 5% from 2.5% by the end of next year, which will affect the cost of the buyer. Meanwhile, the housing market has entered a new cycle of rising prices, especially in the capital Nicosia.
A monthly mortgage payment of €200,000 payable over 20 years at an average market interest rate of 4.5% is around €1,270. This is slightly less than the average salary in Cyprus. According to statistics, the average salary in Cyprus is 1573 euros.
Meanwhile, interested parties must have a deposit set aside to fund at least 30% of the value of the property. In fact, for €200,000, borrowers can buy an apartment of less than 100 square meters. m, most likely not new. If the value of the property is higher, this means a higher loan amount.
Cypriot banks provide plans that in the early years have a fixed interest rate, so the loan installment does not change depending on the policy followed by the ECB.
According to Danos RICS, rents could double in 2023 in some areas. Danos notes that the rent in Larnaca could double from 4.5-5 euros per square meter to 6-10 euros per month. Similarly, the rent in Paphos is expected to rise from 4.5 to 5.5 euros and then from 5 to 10 euros. This means that renting an apartment of 100 square meters in Larnaca or Paphos can cost a family 1,000 euros per month. Rental rates in Famagusta will also increase from 4 to 5 euros and from 5 to 8 euros per square meter. In Limassol , prices will rise from 7 to 14 euros per square meter, from 10 to 15 euros per square meter, with an almost 50 percent increase in prices for low-cost properties.
cost of buying a house in the capital and Famagusta is expected to remain the same in 2023, with an increase of 15% and 20% in Larnaca and Limassol . Buying property in Paphos will cost buyers up to 40% more.
With rising house prices and the rising cost of loans, Cypriots looking for their new home have a lot to think about.
Borrowers also need access to 20% to 30% of the money needed for a deposit in order to buy a property and meet basic banking criteria such as a stable income. The mortgage interest rate rose to 2.95% in November from 2.93% in the previous month.
According to the Central Bank, the effective annual rate that borrowers must pay is 3.63% in November 2022, from 2.86% in 2021 to 2.78% in 2020.
