08.07.2022
The new tax incentives promoted by the government in the context of international headquarters will further increase the demand for luxury homes and more, both for purchase and for rent, attracting foreign professionals and their families to Cyprus.
In particular, in its report on the housing price index for the first quarter of 2022, the Central Bank indicates that the efforts made since last October to attract and locate management offices in Cyprus of companies, mainly high-tech, have already borne fruit, as evidenced by the high annual growth rates of demand from foreign investors.
This is evidenced by recent data from the Department of Lands and Surveys (TCX) in the report, according to which the number of sales documents recorded an increase in the first quarter of 2022 by 51.6% year on year (3009 compared to the previous year). 1985) compared to a slight decrease for the corresponding period in 2021.
In the reporting quarter, demand from domestic buyers increased by 23.8% compared to the same period last year (1,732 vs. 1,399) and by 117.9% from foreign investors (1,277 vs. 586).
As the Central Bank notes in its report, in addition to increasing demand for office space, the relocation of foreign companies to Cyprus also increases the demand for residential properties, since some of their employees will settle in Cyprus in the long term.
In this regard, as he points out, according to unofficial estimates of real estate market experts, there has recently been an increased interest of companies and individuals in moving to Cyprus, mainly from geopolitically unstable areas that distinguish Cyprus as a stable business center.
In this context, according to him, the war in Ukraine could create demand in the real estate market from businessmen and investors from Russia and Ukraine who are looking for an alternative headquarters abroad, choosing Cyprus due to the favorable investment climate, the aforementioned tax facilities and the existing trade relations with the two countries.
However, despite the above, the Central Bank estimates that the real estate sector is expected to continue to face challenges, while the volatility and heightened uncertainty of the past two years as a result of the pandemic, the disruption of international supply chains and O construction, as well as the consequences of the war, will negatively affect the course of construction activities, while raising real estate prices.
Construction cost
In particular, with regard to construction costs, the Central Bank notes that the price index for building materials, which is published by the Statistical Office of Cyprus (CYC), has recorded a consistent increase over the past six quarters.
In particular, in the first quarter of 2022, building materials prices recorded an annual increase of 17.7%, with the largest increase mainly in metals, as structural steel and iron recorded an annual increase, according to the Central Bureau of Statistics . growth in the first quarter of 2022 is 46% and 38%, respectively.
As the Central Bank further highlights, inflationary pressures associated with the recent military conflicts in Ukraine have increased the costs of construction companies, which, in order to cope with new data, must reduce their profits, at the same time, they may partially pass on the increased cost to the prices of new houses. .
According to the Central Bank, higher borrowing costs may also have a negative impact on the real estate market due to a possible increase in interest rates, while the degree of influence of demand on the real estate market through a reduction in real disposable income of consumers will depend on such parameters as the duration of the war and sanctions, the course of pandemics, etc.
However, according to the Central Bank, the gradual increase in foreign and domestic investment, the launch and acceleration of important infrastructure projects and the dynamics of tourism can support demand.
