Despite some uncertainty, there are a number of reasons to believe that the Cyprus property market will continue to show strength in 2021.
At least 2 viable vaccines, limited supply, low mortgage rates and government support are pushing the market to remain stable in 2021.
In 2020, we may see a 23% drop in home sales compared to 2019. Much of 2020 has been a period of lockdowns, travel and tourism restrictions, and great uncertainty. Even under such conditions, sales in 2020 were almost 13% higher than in 2016, and compared to 2017, there is a decrease of only 9%.
The whole of 2020 has passed in anticipation that property purchase prices and rental prices will collapse. Instead, prices are holding up pretty well. On a European scale, according to Eurostat, in the second quarter of 2020, the value of real estate increased by 5% in the euro area (and by 5.2% in the EU area) compared to the second quarter of 2019.
Assuming we can handle the current epidemiological situation, and given historically low interest rates, the lifting of travel restrictions and government stimulus packages, it becomes more and more likely that demand will remain strong.
It is important to highlight that the propensity to generate family savings has reached unprecedented levels in the context of COVID-19. In 2020, household savings in the euro area were the highest since early 1999, according to Eurostat. This is due to a sharp decline in consumption.The offer of real estate in 2020 is lower compared to 2019. Pandemic-related uncertainty has put a brake on new construction, while property owners have retreated into the shadows in anticipation of a better price to sell their properties. This supply constraint is likely to continue into 2021.
This combination of relatively high demand and low supply will keep the Cyprus property market at least stable in 2021.
However, a number of factors remain that potentially threaten the situation. If unemployment remains high, interest rates rise unexpectedly and further economic stimulus is slow, this could also hurt real estate demand. Also, any disruption to COVID-19 vaccination will be devastating for the expected normalization in 2021.
Faced with so much uncertainty, which has had a significant impact on employment and business, many have wondered if we will face a real estate market crash this year. However, it is worth dispelling fears and saying that the real estate market in 2021 will look much more favorable than in 2020, and a recession in 2021 is unlikely. While we are facing another spike in COVID-19 cases, the most negative impact we are likely to see is a short-term decline in sales and value in the first quarter of 2021; before re-entering a period of sustained recovery during the remainder of the year.