Real estate agents are expecting a temporary halt and delay in the property market due to rising building materials prices, which is likely to continue over the next period, while the invasion of Ukraine and sanctions against Russia are causing a stir in the sector.
The chairman of the Real Estate Registration Board, Marinos Kinageiro, explains that even if the war stops, it will still be a long time before the situation returns to normal, stressing that the luxury real estate market is expected to suffer more, as well as projects under development that were financed with Russian funds.
Analyzing trends in the real estate market, Mr. Kinaigeiru refers to types of real estate, the demand for which exceeds supply, such as apartments in the city center, noting that there is also a shortage of large, high-quality offices.
How is the real estate market moving two years after the start of the pandemic?
To be sure, the pandemic has affected the work of real estate agents, as well as the entire real estate sector and land management. After all, this could not remain unaffected, as the economy, both in Cyprus and in the world, suffered. Uncertainty always influences big investment decisions. Especially when the uncertainty is related to the state of health. This is exactly what happened in the period 2019-2020. In 2021, the situation in the sector has improved and we have seen encouraging signs of recovery as the market has grown in both real estate sales and rentals. The first two months of 2022 also went very positively, with sales documents across the country registering a 65% increase.
Construction costs and Russia
What effects do you see from a sharp rise in construction costs, and how is it expected that the Russian-Ukrainian crisis will affect the situation?
Indeed, we are concerned about the rapid rise in the cost of construction, as the impact on the construction industry is intertwined with our own services. The rally in construction materials growth due to inflation is likely to continue into the next period, and a significant increase in costs is expected. This will certainly lead to a temporary numbness and delay in the market until everyone is aware of developments and appropriate adjustments are made to the budgets of both companies in the sector and buyers.
On the other hand, the invasion of Ukraine is another major problem for our sector. The sanctions imposed by Russia, an important market for the industry in Cyprus, leave no one indifferent. Even if the war stops, it will take a long time to normalize the situation, as the ruble exchange rate, inflation and sanctions will have significant long-term consequences. It is expected that the elite real estate market will suffer the most, as well as projects under development, which were financed by Russian funds.
What trends do you see in the Cyprus property market? What are the buyers asking for? What cities and what objects are of interest to buyers?
In real estate, there are opportunities both for owning or acquiring a second home, and for investment purposes, as there is a large offer for specific types of real estate. Of course, there are certain types of real estate where demand is outstripping supply, such as apartments in the city center, while there is a gradual shortage of large quality office space. In addition, increased demand for warehouse space is expected in the near future, as the growth of all forms of e-commerce was not a pandemic phenomenon, but remained. There was no sharp diversification of demand at the provincial level. In each province there is a demand for certain types of real estate, both for purchase and for rent.
New General Real Estate Appraisal
What is the significance for buyers of the new overall property valuation in the Cypriot market? How does access to comparative real estate sales data affect your sector?
As it became known, in May next year, a new general assessment of real estate in Cyprus is expected to be published in prices as of January 1, 2021. The total valuation of about two million properties is carried out mainly for tax purposes through mass valuations every three years based on the relevant legislation. It is important for property owners and other interested parties to know that this assessment is made solely for tax purposes and should not be the basis for transactions that should be carried out after a specialized assessment based on real market data.
With regard to access to data from the Cadastre Department for comparative real estate sales for licensed real estate agents, this is an important step on the part of the Department, as it will contribute to a better perception of the image prevailing in the real estate market. In addition, we believe that this greatly increases the transparency and quality of services that real estate agents can provide to their clients.