12.02.2024
The ripple effect describes how property prices in one area affect prices in others, similar to London’s influence on the UK market, where changes in house prices are first felt in the capital and then spread to other regions. For example, during a price boom, house prices first begin to rise in London, and then gradually other regions “catch up” with them. The same thing happens when prices fall. Simply put, areas close to London are the first to feel price changes. It’s kind of a domino effect.
Several reasons contribute to this phenomenon. As soon as an area becomes in demand, people begin to look for new places, maintaining a preference for nearby areas. This cycle continues, people continue to move on, and now the “momentum” spreads further and further.
Financial centers in question, such as London, have faster access to house price information. In addition, participants in such markets are more exposed to the influence of foreign markets, which leads to rapid changes in the economy. This is why economic centers are often the epicenter of the ripple effect.
Limassol is the business center of Cyprus. It is logical to assume that changes in housing prices will be noted first in Limassol , and then spread to other regions.
An analysis of the Central Bank of Cyprus House Price Index revealed interesting signs related to the ripple effect in Cyprus. In Limassol, the dynamics of apartment prices showed a noticeable increase at the beginning of 2017, which spread to other regions about a year later.
Comparing apartments and houses, it is worth noting that prices for apartments in all areas (except Famagusta ) began to rise earlier than for houses, by about 1.5–2 years. This is understandable given the higher demand for apartments. As for Famagusta , trends for apartments and houses here follow the same pattern without noticeable deviations, due to the unique nature of the market in this region.
To date, unofficial data indicates a decrease in rental prices in Limassol from the beginning of the third quarter of 2023. This effect is expected to spread to other regions by the end of 2024, influencing property prices. This, coupled with investors seeking higher yields due to rising interest rates, will put further pressure on property prices. Such an event, if it occurs, will be beneficial for the market as a whole. It is worth noting that market trends described by statistical indices typically lag by about 6 months because the data used is older than 6 months compared to current market conditions.
