05.01.2022
The optimal time to sell real estate is when there is an increase in demand, record selling prices, low interest rates and a shortage of real estate available for sale on the market. Now you can observe all these states. However, they may begin to change.
Here are three things sellers should definitely keep in mind in 2022.
Offer lower than ever, but temporarily
This means buyers have fewer options to choose from, which creates more competition between them and results in a higher property price.
Currently, the lack of supply has become the main reason for the stable price growth that can be observed this year in the real estate market in Europe and Cyprus. However, this trend will not last for three reasons.
Firstly, when COVID-19 broke out, the Cypriot government issued and extended a moratorium on the disposal of pledged property until 10/31/2021. For this reason, very few cases of ransom were made, even fewer than usual. As the moratorium comes to an end, there will be both covid and docovid pending foreclosures, resulting in more properties available for sale, lower asking prices – lower values or at least lower prices.
Secondly, the average monthly income in Cyprus is expected to increase slightly, which will coincide with a significant increase in the cost of living. The pressure on real purchasing power is expected to ease in the coming years. Following this trend, property owners will be more interested in liquidating their assets than before.Thirdly, new construction has declined and stopped in 2020. However, in 2021, despite an unprecedented increase in the cost of building materials, permits for the construction of new homes are expected to increase by about 10-15% compared to last year. This means that by early-mid 2022, you can see an increase in the supply of new properties compared to last year.
Finally, baby boomers (ages 58-75) make up the majority of current homeowners. Consequently, within a decade, many will die, move in with relatives, or actively need smaller and more suitable nursing homes to be downsized.
Gradually, as a result, more houses than usual will come on the market each year. However, this will create excessive demand for smaller properties as millennials choose smaller homes.
Rising rates, lack of availability
Ultra-low interest rates make the cost of a mortgage payment “visually” low, and home prices seem more affordable. However, once mortgage rates rise—and it’s not an “if” question, but “when”—the number of potential buyers will drop significantly as the cost of mortgages gradually increases.
At the same time, given that real estate prices are slow to respond to new market conditions, prices will continue to rise, further worsening housing affordability.However, rising home prices require large down payments, meaning that even those who can afford mortgage payments may not qualify for a mortgage. This, combined with the expected increase in borrowing costs (due to higher interest rates), will lead to a significant reduction in mortgage applications.
Slowdown in real estate sales
Total property sales in 2019 were the highest on record since 2008, with sales up in all areas. Sales were expected to reach and exceed 10,000 by the end of 2021. This amount is almost equivalent to sales in 2019, which totaled 10,366 units. Please note that 2019 was the last active year for the citizenship by investment program. Therefore, the number of sales is already quite large, given the adversity and limitations of the global pandemic.
Sales are expected to decline in 2022; as affordability deteriorates, interest rates are about to rise and supply is expected to rise.
The decision to sell real estate is always a personal and complex one. The coronavirus has just added another layer of complexity. However, one should always consider the prevailing and predictable market conditions in order to make the best decisions.
