The Treasury Department has given a grim outlook for the local property sector if the Middle East crisis drags on, contrary to the Central Bank’s forecast for moderate growth.
According to the head of the economic policy department of the Ministry of Finance, Dionisi Dionysiou , authorities assess that the ongoing war “not only increases uncertainty in the region, but the situation is also expected to have a negative impact on international energy prices and supply chains.”
Regarding the real estate market, concerns are focused on the possible time frame of the crisis in the Middle East.
A Treasury spokesman said the negative impact of the war was acute in the early stages of the conflict, but the situation soon stabilized. “At the present stage, stable investment activity of Israeli investors in the real estate sector is visible; however, the scenario of a protracted crisis in the region, on the real estate market, will have a negative impact,” said Dionysiou . “Israelis make up a significant portion of the foreign buyer market.”
The Central Bank of Cyprus (CBC) does not appear to share the same view as the Ministry of Finance, noting little optimism for the sector in its report. According to CBC, Cypriot companies of Israeli interest have been established on the island thanks to incentives to attract international companies. These companies, as CBC noted, have invested in real estate and are not expected to make massive real estate sales. Given the security and political stability of Cyprus, CBC does not rule out continued demand for real estate from Israeli citizens and companies.
The ECB warned last week that eurozone property companies are facing mounting losses and some will struggle to service their debts, which have risen to levels higher than before the 2008 financial crisis. The losses cited by the ECB are due to significantly higher financing costs, falling commercial property values, lower rental income and growing concerns about the energy efficiency of buildings.
However, the latest Land Registry data on sales documents for the first 10 months of 2023 reflects the resilience of the property sector. The first ten months were the industry’s best since 2008, with sales reaching 13,261 units, according to the data. The number of sales documents for the ten months reached 12,825 units compared to 10,781 units last year, an increase of 36.2%.