08.03.2023
The positive trend in property sales looks set to continue in 2023, driven by foreign buyers from both EU and non-EU countries.
At the same time, there is an upward trend in real estate sales and rental prices, driven by strong demand and rising prices for building materials.
The financial environment in 2023 is currently being affected by some important fiscal parameters.
The growth rate (GDP) in 2023 is expected to be around 3%, which is a significant increase, after a higher growth in 2022 of 5.7%, driven by a recession in 2020. Inflation is expected to improve in 2023 compared to 2022 and should be around 4% compared to 8.1% in 2022.
It is within these parameters that the construction sector operates at full capacity, as in addition to the private sector, many public and private projects are being implemented, as well as large European recovery funds.
New buildings
New builds, especially residential properties, may see some decrease in demand due to higher sales prices, as well as higher interest rates and an expected reduction in VAT sponsorship, factors that should become clearer soon.
Something to look out for and that should act positively is the higher volume of sales coming from overseas buyers. For example, in January 2023, they accounted for 54% of total sales.
It should be noted that in 2022 there was a 30% increase in the number of real estate transactions (contracts deposited with the Land Registry), with Limassol topping the table, followed by Paphos. Of the 13,409 real estate transactions in 2022 (the highest since 2008), 5,928, 44%, involve foreign buyers. This significant increase sends a signal that perhaps foreign buyers will have a strong and healthy presence in 2023. It should be emphasized that if in 2022 50% of foreign buyers were from the EU, then in January last year, three out of four were from outside the EU.
This upward trend in sales to foreigners is expected to continue, with foreign buyers taking the lead this year.
It goes without saying that this upward trend in the real estate sector will also depend on whether and to what extent sales prices and interest rates rise.
Something else that will almost certainly affect the course of the real estate market in 2023 is a possible further increase in sale prices, especially for new apartments, mainly due to increased construction costs.
Cost of materials
An even higher increase in sales prices should be expected after all the increase in the cost of materials is included in selling prices.
Various real estate price indices show that this increase over the past twelve months is between 6% and 12% depending on the methodology used.
It is expected that, although at a slower pace, prices for used apartments will be at about the same level as new ones.
Despite the increase in sales prices, property prices in Cyprus are favorable compared to prices for similar properties in neighboring and European countries.
Comparing prices with previous years, we must emphasize that they are still close to the level of 2010 when the price indices were launched.
Another area of the real estate sector is rent. The increase in rents in 2022 was more noticeable than the increase in selling prices. This is mainly justified by the increased demand from Cypriots as well as foreigners.
Students are returning to universities after the pandemic and the number of highly paid foreign workers is on the rise, as thanks to the incentives provided by Cyprus (headquarters), many foreign companies have established a corporate base in our country.
Available objects
It should be noted that the available volume of real estate for rent, especially new ones, is small. Therefore, even a small increase in demand has a significant increase in rent.
In 2023, rents are expected to stabilize at current levels unless the influx of highly paid foreign workers continues.
It should be emphasized that this certainly affects both sales and rental prices, is that the volume of old rented apartments available due to the Rent Control Law continues to create problems such as the creation of ghettos, their security risks and, of course, poor conditions for tenants living in them.
All of the above is another reason to address the problems caused by the Rent Control Act and the Common Property Buildings Act.
Expectations for 2023
This brief analysis leads us to believe that the following trends will be presented in 2023:
- Increased interest in selling and renting from foreigners.
- A rising trend in prices for new and used residential real estate.
- Slight increase or stabilization in rental prices.
- Due to price increases, the new VAT status and interest rates, there will be a stabilization or even a decrease in the interest of Cypriots in acquiring housing. Increased interest in buying second-hand apartments is not ruled out.
- Increased interest from investors is expected as rental income continues to be at a satisfactory level.
These anticipated trends may change at any time in the event of instability in international economic and political conditions. Therefore, estimates need to be interpreted in light of the possibility of changes in today’s international and domestic market conditions.
