14.05.2024
Residential property prices continued to rise in the fourth quarter of 2023, driven primarily by rising apartment prices. According to a report released on Tuesday by the Central Bank of Cyprus, the CBC Residential Property Price Index (HPI) registered an increase on both an annual and quarterly basis.
According to the survey, residential property prices continued to rise in the fourth quarter of 2023 despite a slight decline in demand, as reflected in TKX’s comparative sales data. As rising mortgage rates have a significant impact on new mortgage demand, normalization of foreign buyer demand, increased supply of residential properties and stabilization of building materials prices, the consumer price index is expected to show more moderate growth in the near future.
According to the Department of Cadastre and Spatial Surveys (TSD), the total number of purchase and sale documents submitted to district offices covering all types of real estate showed a slowdown in year-on-year growth in the fourth quarter of 2023.
The overall demand for real estate has increased from domestic buyers, while the number of sales documents filed by foreign buyers has decreased. In addition, there has been a decrease in the number of registrations of companies with foreign interests through the Company Promotion Department in relation to 2022 as part of the “Strategy for attracting companies to intensify and/or expand their activities in Cyprus”.
On the demand side, the total value and number of residential real estate transactions (houses and apartments) in 2023 decreased slightly compared to 2022, according to TKX comparative sales data. This was compounded by the continued rise in mortgage interest rates, which was also recorded in the fourth quarter of 2023, as was the decline in the number of new mortgage loan approvals in 2023 compared to 2022.
Also, relatively higher demand for apartments than for houses continues to be recorded. This is due to buyers shifting to smaller properties, which is reflected in the reduction in the size of the housing unit for which a building permit has been issued.
On the supply side, according to market participants, it is limited by the high level of demand. This fact appears to be an important factor contributing to the increase in the CPI. However, the increase in the number of residential units granted planning permission in 2023, coupled with the fact that a significant number of construction projects are already underway, will lead to an increase in the supply of residential property in the medium term, which is expected to will mitigate these price pressures.
Residential property price index increased by 2.3%
The CPI (houses and apartments) recorded a growth of 2.3% in the fourth quarter of 2023, compared to a growth of 2.2% in the previous quarter. The increase in the consumer price index in the fourth quarter of 2023 compared to the previous quarter was due to an increase in residential real estate prices by 1.8% and an increase in apartment prices by 3.2%.
On an annualized basis, residential property prices rose 8.3% in the fourth quarter of 2023, up from 7.6% in the third quarter of 2023. Prices for apartments increased by 12.7% and houses by 5.7% during the quarter under review.
As reported, rising mortgage interest rates due to the ECB’s single contractionary monetary policy have increased borrowing costs for existing and potential new clients of domestic financial institutions, which has impacted demand for new loans for the purchase of residential property in 2023. This event appears to have impacted residential real estate demand as reflected in TSX comparable sales data, with total residential real estate values and transactions down in 2023 compared to 2022.
