03.04.2023
The inflation rate in Cyprus is declining but still remains high (6.7% in February 2023). Interest rates are very low: 1.29% for deposits of individuals and 1.27% for deposits of legal entities. In addition, there are no other investment opportunities in Cyprus, as the Cyprus Stock Exchange shows a low yield – about 2 percent per annum.
Inflation increases the cost of borrowing and, at the same time, increases the cost of production, making it difficult to produce goods and services, including production in the real estate market, houses, apartments, and so on.
The war in Ukraine has affected the production of new properties due to the increase in construction costs, although demand remains stable.
According to the overall RICS index, the average property yield in Cyprus for 2022 is: 5.3% for apartments, 2.8% for houses, 5.7% for shops, 4.3% for warehouses, 5.3% for offices, 5.4% for holiday apartments and 2.7% for holiday homes.
It can be seen from the sales results in 2022 that the real estate market is strong and has reached almost 6 billion euros in sales.
According to the Land Registry, apartments are the top sellers, with total sales not only reaching and surpassing 2018 levels (20,799 sales in 2022 vs. 18,336 sales in 2018), with local buyers accounting for more than 80 percent of total sales, to EU buyers about 13 percent, and the rest about 7 percent.
A recent land registry report states that the war in Ukraine did not have a significant impact on real estate values in 2022, while sales contracts increased by about 30% (10,347 in 2021 and 13,409 in 2022).
The RICS index confirms the fact that apartments lead in sales in all areas, as they have the highest rates. This is especially noticeable in Limassol , where the highest yield.
Comparing 2021 with 2022, it can be seen that the yield of apartments and houses has increased in 2022. Therefore, buying a property in 2023 is a good investment and demand remains high, especially in Limassol with a yield of 7% for apartments and 4-6% for the rest parts of Cyprus, depending on the location and type of property.
Property values are not expected to be “adjusted” downwards as Cyprus has a strong economy and high demand for property, with supply currently stable and building permits declining for 2023/2024. The value of real estate will not only be stable, but may also increase.
Thus, the real estate market is currently the best investment, in particular residential properties with Limassol and Paphos in the lead, however, all cities have good returns depending on personal preferences and the available budget.
Also worth noting is the clear increase in demand from foreigners in the Cypriot market between 2020 and 2022, with sales to foreigners rising from 2432 in 2020 to 4123 in 2022.
Cyprus offers foreign buyers more than just a good investment in the real estate market. With a minimum investment of €300,000, they can stay in Cyprus thanks to their residence permit, work, study and enjoy more than 350 days of sunshine, in addition to tax and other benefits.
