Cyprus’ housing market stabilizes, amidst improving economy

Lalaine C. Delmendo | August 05, 2021

After a major pause last year due to the COVID-19 pandemic, Cyprus’ housing market is now showing signs of recovery. Low interest rates, coupled with government relief measures, are currently driving property demand and construction activity.             

During the year to Q1 2021, the nationwide residential property price index rose slightly by 0.91% (1.64% inflation-adjusted), a slowdown from the 1.82% y-o-y rise seen in Q1 2020, according to the  Central Bank of Cyprus (CBC).

Cyprus house prices

By district, during the year to Q1 2021:

  • Nicosia, Cyprus’ capital, apartment prices rose by 2.2% but house prices fell slightly by 0.9%.
  • In Limassol, apartment prices rose by 3.4%, and house prices increased by 2.7%.
  • In Larnaca, apartment prices rose strongly by 6%, but house prices fell by 0.8%.
  • In Paphos, both apartment and house prices fell by 3% and 1.6%, respectively.
  • In Famagusta, apartment prices rose by 3.2% while house prices dropped slightly by 0.1%.

Residential construction activity has quickly bounced back. In the first four months of 2021, the number of value of residential building permits rose by 44.6% and 47% y-o-y, respectively. Dwellings authorized also increased almost 50% y-o-y to 3,353 units in Jan-Apr 2021.

After a double-digit decline last year, demand is now rising again. In the first five months of 2021, total property sales in Cyprus rose strongly by 36.2% y-o-y to 3,577 units, according to the Department of Lands & Surveys. Domestic sales, which accounted for more than two-thirds of total sales, soared by 73% y-o-y to 2,482 units while property sales to foreigners fell by 8% to 1,095 units over the same period.

Overall, Cyprus’ real estate market is expected to remain steady during the remainder of the year. “Activity and prices in the main commercial centres of Nicosia and Limassol are currently stable, as locals are acquiring residential properties taking advantage of various government subsidies and in order to generate income,” said consultancy firm Wire FS. However, “other districts are continuing to experience low levels of demand, as they are more reliant on overseas markets and have a higher dependency on tourism.”

In the first half of 2021, tourist arrivals totalled 340,984 people, up by 33.4% from last year but still down by a huge 79.1% from the 1.63 million arrivals recorded in H1 2019.

The Cyprus real estate market has historically been divided into the major urban centres of Nicosia, Limassol and Larnaca (primarily driven by local demand); and the seaside resort areas of Paphos and Famagusta, which are mostly driven by foreign demand.

Foreigners can buy one home in Cyprus, and are entitled to hold land freehold, but there is a maximum limit on land ownership of 3 donums (4,014 sq. m.).

The International Monetary Fund (IMF) expects the Cypriot economy to grow by a modest 3% this year, following a contraction of 5.1% last year. But the Finance Ministry is more optimistic, projecting growth of 4.5% to 5% this year.

Brief history of Cyprus’ housing market

Cyprus’ housing market has been on a roller-coaster ride. During a crazy boom in the mid 2000’s built on tourist demand and Russian money, there were house price increases of 22.06% (17.46% inflation-adjusted) in 2007, and 9.73% (7.47% inflation-adjusted) in 2008. But then house prices fell by 30% (32.3% inflation-adjusted) from 2009 to 2016, beginning their decline in 2009 due to the global financial meltdown, according to figures from the Central Bank of Cyprus (CBC).


Year Nominal Inflation-adjusted
2009 -1.86 -3.83
2010 -3.57 -5.13
2011 -4.96 -8.55
2012 -4.71 -5.75
2013 -8.50 -6.34
2014 -8.02 -6.66
2015 -1.82 -0.85
2016 -0.94 -0.69
2017 1.78 2.38
2018 2.51 0.80
2019 2.16 1.44
2020 0.75 1.92
Sources: Central Bank of Cyprus, Global Property Guide

Cyprus’ housing market started to stabilize in Q1 2017, amidst an improving economy. Nationwide house prices rose by an average of 2.2% (1.5% inflation-adjusted) annually from 2017 to 2019.

Cyprus price index

Last year, house prices rose by a miniscule 0.75% (1.92% inflation-adjusted) due to the pandemic.

Demand recovering rapidly, buoyed by local buyers

After falling sharply last year due to the pandemic, demand is now recovering remarkably. In the first five months of 2021, total property sales in Cyprus rose by 36.2% y-o-y to 3,577 units, according to the Department of Lands & Surveys.

By major urban centres:

  • Nicosia registered 1,110 sales contracts in Jan-May 2021, up by a huge 70% from a year earlier.
  • In Limassol, property sales were up by 48% y-o-y to 1,086 units over the same period.
  • In Larnaca, property sales rose by 25% y-o-y to 566 units.
  • In Famagusta, sales contracts rose by 22% y-o-y to 214 units.
  • Paphos is the only major Cypriot city to register a modest decline in sales, due to weak demand from non-EU citizens. Sales contracts dropped 2% y-o-y to 601 units in Jan-May 2021.

Domestic sales, which accounted for more than two-thirds of total sales, rose strongly by 73% y-o-y to 2,482 units in the first five months of 2021. In contrast, property sales to foreigners fell by 8% to 1,095 units over the same period.

Before the pandemic, strong interest from foreigners drove the country’s housing market recovery in recent years, predominantly from non-EU buyers. In 2019, property sales in Cyprus rose by 12.2% to 10,366 units from a year earlier, the biggest sales total since 2008. It followed rises of 5.8% in 2018, 23.7% in 2017, 42.6% in 2016, 9.4% in 2015 and 20.2% in 2014.

However with worldwide lockdown measures and travel restrictions, total sales dropped 23.1% to 7,968 units in 2020.

Rents and yields are falling

Average gross yields in Cyprus stood at 4.8% for apartments in 2020, down from 5% in 2019 but up from 4.5% in 2018, 4.3% in 2017 and 4% three years ago, according to RICS. Likewise, gross yields for houses were 2.5% in 2020, slightly down from 2.6% in 2019 but still up from 2.4% in 2018, 2.2% in 2017 and 2.1% three years ago.

Cyprus rental yields

Nicosia and Limassol usually offer higher gross rental yields as compared to other Cypriot cities.

Across Cyprus, monthly rents for apartments fell slightly by 0.6% during the year to Q1 2021, according to consultancy firm Wire FS. On the other hand, house rents increased 2.6% over the same period.

Cyprus house monthly rent

Danos& Associates projects residential rents to fall in almost all major Cypriot cities this year.

  • Nicosia, Cyprus’ capital, residential rents will vary from €7 to €11 per sq. m., slightly down from €8 to €10 per sq. m. in 2020.
  • In Limassol, rents will range from €16 to €35 per sq. m. in 2021, down from €20 to €40 per sq. m. last year.
  • In Larnaca, rents will range from €6 to €10 per sq. m. this year, down from €8 to €10 per sq. m. in 2020.
  • In Paphos, rents will vary from €8 to €14 per sq. m. this year, from €10 to €12 per sq. m. last year.
  • In Famagusta, average rents will range from €8 to €14 per sq. m. this year, from €10 to €12 per sq. m. in 2020.

Cyprus property sales

In Ayia Napa, a well-known Mediterranean resort town on the southeast coast of Cyprus, monthly rents for one- to two-bedroom apartments range from €800 to €1,500. Three- to four-bedroom villas can be rented for €2,000 to €5,000 per month.

Citizenship-by-investment scheme scrapped

Aside from coronavirus-related lockdowns and travel restrictions, the recent termination of the country’s controversial Citizenship-by-investment (CBI) program has also adversely affected prospective foreign homebuyers in Cyprus.

In October 2020, the government suspended the scheme due to a breach of procedures. This is in response to claims that golden passports were issued to people with criminal record or who are prosecuted for financial crimes. It was also alleged that the programme department accepted applications with false information about an investor’s sources of income. Worse, senior government officials were allegedly involved in the violations.

According to former president of Supreme Court Myron Nicolatos, 53% of the 6,779 golden passports issued during the programme’s 13-year run were given not to the investors themselves but to family members or top company executives.

“It’s obvious that the (programme) operated between 2007 and Aug. 17, 2020, with blanks and omissions, without a legal framework and almost without a regulatory framework,” said Nicolatos. “Also absent were those safety valves, the proper legal guidance as well as adequate supervision regarding existing laws and regulations.”

Total investment by foreigners under the programme amounted to about €9.7 billion, according to the Cyprus Ministry of Finance.

Residential construction activity rising again

Unsurprisingly, residential construction in Cyprus fell last year due to the adverse impact of the pandemic. During 202o, the number of residential building permits fell by 2.1% y-o-y to 5,069 and the value of permits dropped 16.3% to €2.03 billion (US$2.41 billion), according to the Cyprus Statistical Service. Dwellings authorized also fell by 3.5% y-o-y to 9,292 units last year.

Cyprus dwellings authorized

As economic conditions gradually improve, construction activity is now gaining momentum. In the first four months of 2021:

  • No. of residential building permits: up 44.6% y-o-y to 1,803
  • Area of residential building permits: up 49.4% y-o-y to 625,689 sq. m.
  • Value of residential building permits: up 47% y-o-y to €636.67 million (US$755.54 million)
  • Dwelling units authorized: up 49.8% y-o-y to 3,353 units

Dwelling stock in the country reached around 460,000 units in early last year.

Interest rates remain low

Interest rates in Cyprus are low, following European Central Bank (ECB) key rates. As of May 2021, the following average housing loan rates applied in Cyprus:

  • Interest rate fixation (IRF) of up to 1 year: 1.3%, slightly up from 1.22% in May 2020 but still down from 1.49% in May 2019
  • IRF over 1 and up to 5 years: 1.69%, down from 1.81% a year ago and 2.28% two years ago
  • IRF over 5 years: 2.05%, down from 2.17% in May 2020 and 2.43% in May 2019

Variable-rate mortgages now account for about 98% of all housing loans in Cyprus.

Cyprus interest rates housing loans

The ECB left its key rate unchanged at an all-time low of 0.00% in June 2021, after cutting it by 5 basis points in March 2016. In previous years, banks in Cyprus have been slow to respond to ECB interest rate cuts, but this seems to be changing.

Residential mortgage loans continue to fall

Despite low interest rates, total housing loans outstanding fell by 5.1% y-o-y to €8.76 billion (US$10.39 billion) in June 2021, following declines of 1.8% in 2020 and 1.5% in 2019, according to the Central Bank of Cyprus.

In June 2021, by residence of borrower:

  • Domestic residents: outstanding loans drawn fell by 4.1% y-o-y to €8.17 billion (US$9.69 billion)
  • Euro-area residents: down by 16.5% y-o-y to €31.3 million (US$37.1 million)
  • Non-euro area residents: down by 17.2% y-o-y to €558 million (US$662.2 million)

Housing loans outstanding have been falling since 2012 when Cyprus’ banking system collapsed amidst the global credit crunch.

Cyprus housing loans

From 29.1% of GDP in 2005, the mortgage market grew to about 91.3% of GDP in 2012. But it has contracted sharply since to 42.7% of GDP in 2019. Last year, outstanding mortgage loan to GDP grew to 44.5% because of pandemic-induced economic downturn.

Home foreclosures moratorium extended

In July 2021, lawmakers passed a law further extending a freeze on home foreclosures, despite objections from the government and the banking sector. This extends the current moratorium on repossessions from July 31 to October 31, 2021.

However the exemptions threshold was substantially lowered. With the latest amendment, the properties exempt from foreclosures include:

  • Primary residences valued at up to €350,000 (from the previous €500,000)
  • Business premises with annual turnover of up to  €750,000 (from the previous €2 million)
  • Agricultural land plots valued at up to €100,000 (from the previous  €250,000)

Cyprus’ property title deeds fiasco remains unresolved

Property frauds in Cyprus are a huge problem for expat homeowners, but also for developers, banks, and the government. Many buyers have lost their homes after the developer went bankrupt, despite having paid in full.

Developers tend to keep the title deeds, neglecting to inform house-buyers that their title deeds will be withheld for an unspecified time, or that the land on which their property is built has been mortgaged by the developer.

Between January 2005 and June 2008 a total of 37,769 overseas buyers purchased 29,949 properties for which Title Deeds had yet to be transferred, according to the Cyprus Department of Land Registry report published in October 2008. “Some cases have involved ‘double selling’ fraud whereby the developer sells a property to Party A, fails to lodge the contract with the Land Registry, and then sells it again to Party B (possibly for a higher price) but fails to reimburse Party A,” says Alan Waring, an international risk management consultant.

To resolve the scandal, a new directive on mortgage credit was adopted on January 28, 2014 by the Economic and Financial Affairs Council. The new law sets out conditions for ensuring professionalism amongst creditors and credit intermediaries; principles for marketing and advertising; obligations relating to pre-contractual information; requirements for information on the borrowing rate; and requirements to check the consumer’s creditworthiness; and disclosure obligations for the consumer.

The property title deeds fiasco however remains unresolved. According to European Commission’s Post-Programme Surveillance Report of spring 2017, at the current rate of Title Deeds issuance, it would take about ten years to address the backlog of unissued Title Deeds, which already reached around 30,000.

Cyprus building permits

“The currently dysfunctional Title Deeds issuance and transfer system is deterring potential investors and thus weighing on the liquidity of the property market,” said the European Commission. “Although some measures were taken to streamline the issuance of Title Deeds for new properties, no new measure was announced to provide for a sustainable system of transfer of Title Deeds.”

The Immovable Property Transfer and Mortgage Law (Amendment) (No. 10) of 2015, better known as the ‘Trapped Buyers’ Law or the ‘Hidden Mortgages’ Law, was passed to help property purchaser(s) to obtain a Title Deed, if they cannot obtain one despite having fulfilled their contractual obligations to the vendor.

The following can apply for Title Deeds:

  • The buyer who has yet to receive the Title Deed of the property he purchased
  • The vendor of the property, whether a private individual or a property development company
  • The lender who granted the loan to the property buyer
  • The mortgagee under the mortgage contract deposited at the Land Registry
  • The buyer who purchased the property thru assignment or vesting contract deposited at the Land Registry
  • The Director of the Department of Lands and Surveys ex officio

However a court ruled in May 2017 that the new law is unconstitutional because it violates Article 26 of the Constitution, which affords individuals the right to enter freely into a contract. As such, the land registry suspended procedures, as the government contemplated its next move.

In July 2019, the government approved amendments seeking to improve the 2015 law to finally resolve the problem. The amendments ensure the involvement in the process of all three parties – buyer, lender and seller – and afford the capacity of filing a substantiated objection and securing a court order within a defined timeframe to stop the transfer.

Then in April 2021, the Congress voted for two amending laws, which allow all interested parties upon the consent of the registered owner of the property (the developer) to apply for the transfer of the property until December 31, 2021, regardless of the existence of the certificate of unauthorized works.

Banking system resilient

In 2012, Cyprus’ huge offshore banking system, which was not unlike Iceland’s, collapsed. By 2012 the banking sector had assets of US$120 billion in an economy with a GDP of only US$24 billion, with US$60 billion of these assets involving Russian corporations’ deposits.

Cypriot banks had a hard time making a return on all this money, and their response was to raise loan risk-levels, lending to Cyprus’ local property companies, and to the Greek government, which in 2012 experienced the largest sovereign debt default in history.

In March 2013, Cyprus was bailed out by the Troika, composed of the International Monetary Fund, European Central Bank and European Commission. Cyprus was lent €10 billion (US$11.9 billion). Included in the agreement was a haircut for bank deposits of more than €100,000 (US$118,700) at the country’s two largest banks-Bank of Cyprus, and Cyprus Popular Bank (Laiki Bank).

The terms required Cyprus to cut public sector spending, hike taxes, and cut its bloated banking sector. The loss of confidence had an enormous impact on the local economy, combined with the decline in tourism largely resulting from the Eurozone crisis, and the downgrading of the Cypriot government’s bond credit rating to junk status.

Over the last six years, Cyprus has had impressive policy achievements, ending its IMF bailout program before term. Significant legal and institutional changes were introduced. The banking system is now on more solid ground. Unemployment fell continuously from 16.1% in 2014 to 7.1% in 2019. The economy grew by an annual average of 4.6% in 2015-19.

Banking system solvency improved. Despite the pandemic, NPLs continuously fall to about 17.7% of total gross loans in 2020, down from 27.9% in 2019 and 47.8% in 2014. The reduction in NPLs can be attributed to increased repayments, restructurings, write-offs, and settlement of debt through swaps with real properties intended to be sold for faster cash collection, according to the central bank. The housing market recovery is also helping improve Cypriot banks’ asset quality.

In April 2021, NPLs in the Cypriot banking system amounted to about €5.14 billion (US$6.1 billion), almost unchanged from a year earlier but significantly down from €8.97 billion (US$10.64 billion) in 2019 and a peak of €28 billion (US$33.23 billion) in 2013 – a decline that can be considered as the fastest in the EU.

As a result, Moody’s Investor Service has upgraded the country’s sovereign credit rating in July 2021, from Ba2 to Ba1, with a stable outlook, amidst the continued decline in banking sector risks and the country’s resilience to shocks brought by the pandemic.

“The primary driver for the upgrade of the ratings of Cyprus to Ba1 is the material improvement in the underlying credit strength of the domestic banking system, which also reduces the risks of a systemic banking crisis and therefore lowers the risk of a crystallization of contingent liabilities in the banking system on the government’s balance sheet,” said Moody’s.

Earlier, Standard & Poor’s and Fitch Ratings affirmed the country’s long-term issuer rating at BBB-, with a stable outlook.

Cypriot economy recovering

In Q1 2020, the Cyprus economy recorded a quarterly growth of 2%, an improvement from the previous quarter’s 1.1% growth and the highest in the eurozone. The euro area contracted by 0.6%, on average, during the quarter.

“The above increase is the highest recorded in the eurozone while most European countries continue to have negative growth rates compared to the previous quarter,” said Finance Minister ConstantinosPetrides.

On an annual basis, the economy contracted by 1.6% in Q1 2021, an improvement from y-o-y declines of 4.4% in Q4 2020, 4.6% in Q3, and 12.5% in Q2. Cyprus had recovered strongly since the banking crisis, registering  annual average growth of 4.6% from 2015 to 2019.

Cyprus gdp inflation

The International Monetary Fund (IMF) expects the Cypriot economy to grow by a modest 3% this year, following a contraction of 5.1% last year. The Finance Ministry is more optimistic, projecting growth of 4.5% to 5% this year.

Cyprus recorded a budget deficit equivalent to 5.7% of GDP in 2020, in sharp contrast to a surplus of 1.5% of GDP in 2019, after the government allocated over €1.2 billion (US$1.4 billion) for COVID-19 assistance to the health sector, households and businesses.

Gross public debt surged to 118.2% of GDP last year, up from 94% of GDP in 2019 and surpassing the previous high of 109.1% of GDP in 2014.

In May 2021, Cyprus president NicosAnastasiades unveiled another economic stimulus plan worth €4.4 billion (US$5.2 billion), which he described as the “most ambitious ever” in the country’s 61-year as an independent republic. The five-pronged plan is projected to increase GDP by 7% over the next five years and create an additional 11,000 jobs.

Cyprus unemployment

“The plan, ‘Cyprus — The Next Day’ is a courageous step forward and a new and necessary development model for the future,” said Anastasiades. “It’s the road map for the post-COVID-19 era.”

Seasonally-adjusted unemployment rate in Cyprus stood at 7.9% in June 2021, sharply down from 9.8% in the previous month but still slightly up from 7.6% in June 2020, according to Eurostat. From an average of just 4.8% from 2000 to 2011, unemployment had surged to an average of 11.7% from 2012 to 2020, based on figures from the IMF.

Consumer prices rose by 3.1% in June 2021 from a year earlier, the biggest increase since March 2012, mainly driven by increases in housing and utilities prices and transport costs. Inflation averaged -0.2% in the past eight years.


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