The recovery in property prices continued in the fourth quarter of 2021, mainly driven by domestic demand. However, the Central Bank of Cyprus (CBC) notes that the constant increase in construction costs due to the war in Ukraine and problems in the supply chain may negatively affect demand in the future.
Growth in the CBC Residential Property Price Index (RPPI) accelerated slightly in the fourth quarter of 2021.
According to the CBC, the rise in prices was partially driven by the continued rise in construction costs (an annual increase of 17.3% in the fourth quarter).
Given that most building materials are imported to Cyprus, the CBC notes that the war in Ukraine and supply chain issues affecting international trade are expected to further increase construction costs, negatively impacting future demand.
In particular, according to the CBC survey, quarterly growth was 1.3% compared to 0.6% in the third quarter of 2021, while year-on-year RPPI recorded an increase of 2.6% compared to 1.2% in previous quarter.
The increase in housing prices is driven mainly by the apartment market and to a lesser extent by houses.
In particular, housing prices increased 1% year on year and 0.7% quarterly, while apartment prices rose 6.3% year on year and 1.3% quarterly. According to the CBC, apartment prices rose in all districts both quarterly and year-on-year.
The real estate market in the fourth quarter of 2021 continued to rely mainly on domestic demand. In addition, transactions in 2021 mainly concerned houses with a value between 100,000 and 300,000 euros, which is part of the market regarding the purchase of a main residence or investment for rent.
The CBC also indicates that demand from foreign investors is slowly recovering from the decline recorded in 2020, after the cancellation of the Cyprus investment program and the start of the pandemic. This increase is mainly due to the attraction of foreign companies wishing to move their headquarters to Cyprus.