Cyprus’ housing market continues to grow, amidst increasing property sales driven by strong domestic demand, coupled with returning foreign investors.
During the year to Q2 2023, the nationwide residential property price index rose by 7.42% (5.41% inflation-adjusted), following y-o-y increases of 7.66% in Q1 2023, 6.6% in Q4 2022, 6.28% in Q3 2022, and 4.57% in Q2 2022, based on figures from the Central Bank of Cyprus (CBC). On a quarterly basis, prices increased by 1.46% (1.15% inflation-adjusted) in Q2 2023.
Cyprus’s house price annual change
By district, during the year to Q2 2023:
- Nicosia, Cyprus’ capital, apartment prices rose by a modest 4.16%, and house prices were up by 4.76%.
- In Limassol, apartment prices soared by 13.94%, and house prices increased by 6.51%.
- In Larnaca, both apartment and house prices rose by 13.06% and 6.35%, respectively.
- In Paphos, apartment prices rose strongly by 16.33% while house prices increased by a more modest 4.71%.
- In Famagusta, apartment prices rose by 2.46% while house prices increased by 7.36%.
By property type, apartment prices in the country rose strongly by 10.05% (7.99% inflation-adjusted) in Q2 2023 from a year earlier while house prices increased by a more moderate 5.58% (3.6% inflation-adjusted) over the same period.
Demand is surging. During 2022, total property sales in Cyprus rose strongly by 29.6% y-o-y to 13,409 units, following a 30% growth in 2021 and a 23.2% contraction in 2020, according to figures from the Department of Lands & Surveys. In fact, it is now the highest sales recorded since 2008. The strong recovery in demand continued this year, with sales rising in all districts, particularly outside the capital city. In the first ten months of 2023, nationwide sales soared by 19% to 12,825 units compared to the same period last year.
However, residential construction activity showed mixed results. In the first eight months of 2023, the number of residential building permits fell by 7.1% to 3,198 while dwellings authorized increased by 5.5% y-o-y to 6,969 units.
Overall, Cyprus’ real estate market is expected to remain robust during the remainder of the year, buoyed by strong domestic demand, coupled with recovering tourism.
In the first half of 2023, tourist arrivals totaled 1,613,690 people, up by a huge 32.1% as compared to the same period last year, according to figures released by the Press and Information Office, Ministry of Interior. Arrivals from the UK were the main source of tourism in Cyprus in June 2023, with a share of 34.8% of total arrivals, followed by Israel (10.2%), Poland (6.6%), Sweden (5%) and Greece (4.5%). With a surge in tourism, the number of foreign homebuyers in Cyprus is expected to continue rising in the coming months.
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 Cyprus real estate market has historically been divided into the major urban centers of Nicosia, Limassol, and Larnaca, which are primarily driven by local demand; and the seaside resort areas of Paphos and Famagusta, which are mostly driven by foreign demand.
The overall economy remains healthy, although economic growth will slow this year. In Q2 2023, Cyprus’ seasonally-adjusted real GDP growth eased to 2.3% from a year earlier, down from 3.4% in Q1 2023, 4.4% in Q4 2022 and 5.3% in Q3 2022, according to the Statistical Service of the Republic of Cyprus (Cystat). It was the ninth consecutive quarter of y-o-y expansion but the lowest in a row, amidst persistent inflationary pressures and rising interest rates.
As such, the International Monetary Fund (IMF) expects the Cypriot economy to grow by just 2.2% this year, a sharp slowdown from annual expansions of 5.6% in 2022 and 6.6% in 2021. This is in line with the European Commission’s economic forecast for Cyprus of a 2.3% growth this year.
A brief history of Cyprus’ housing market
Cyprus’ housing market has been on a roller-coaster ride. During a crazy boom in the mid-2000s 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.
|HOUSE PRICES IN CYPRUS, ANNUAL CHANGE (%)|
|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.
In 2020 during the onset of the COVID-19 pandemic, house prices rose by a minuscule 0.75% (1.92% inflation-adjusted), amidst falling demand. But the housing market bounced back quickly, with house prices increasing by a modest 2.63% in 2021 and by another 6.6% in 2022. However, in real terms, house prices actually declined by 2.09% in 2021 and by 1.22% in 2022, amidst soaring inflation.
Demand surging again, buoyed by both local and foreign buyers
During 2022, total property sales in Cyprus rose strongly by 29.6% y-o-y to 13,409 units, following a 30% growth in 2021 and a 23.2% contraction in 2020, according to figures from the Department of Lands & Surveys. In fact, it is already above the total sales of 10,366 units recorded in 2019 before the pandemic and the highest sales recorded since 2008.
Domestic sales, which accounted for about 56% of total sales, rose by 12.4% y-o-y to 7,481 units in 2022. Likewise, property sales to foreigners soared almost 61% y-o-y to 5,928 units over the same period.
Strong interest from foreigners drove the country’s housing market recovery in recent years, predominantly from non-EU buyers. Before the COVID-19 pandemic, property sales rose by 12.2% y-o-y in 2019, following rises of 5.8% in 2018, 23.7% in 2017, 42.6% in 2016, 9.4% in 2015, and 20.2% in 2014.
The strong recovery in demand continued this year, with sales rising in all districts, particularly outside the capital city. In the first ten months of 2023, nationwide sales soared by 19% to 12,825 units compared to the same period last year.
By major urban centers:
- Nicosia registered 2,451 sales contracts in Jan-Oct 2023, up by 8% from a year earlier.
- In Limassol, property sales were up by 14% y-o-y to 4,225 units over the same period.
- In Paphos, sales contracts soared by about 25% y-o-y to 2,878 units.
- In Larnaca, property sales skyrocketed by 32% y-o-y to 2,612 units.
- In Famagusta, sales contracts rose by 22% y-o-y to 659 units.
However, demand is projected to stabilize in the coming months due to various challenges, including the expected adverse impact of the ongoing war in Israel.
“Despite the apparent impact of inflation on purchasing power, combined with high-interest rates on housing loans, we see the property market endures,” said Marinos Kynegirou, President of the Real Estate Agents Registration Council. “We expect to see the impact of the war in Israel in the coming months.”
Rental yields rising gradually; rents continue to increase
Average gross rental yields for apartments in Cyprus stood at 5.53% in Q3 2023, up from 5.11% in the same period last year and about 4% six years ago, according to RICS. Likewise, gross yields for houses were 2.95% in Q3 2023, up from 2.79% in Q3 2022 and 2.1% six years ago.
This is supported by recent research conducted by the Global Property Guide in August 2023, which showed that Cyprus’ average gross rental yields stood at 4.93%.
Nicosia and Limassol usually offer higher gross rental yields as compared to other Cypriot cities.
Across Cyprus, monthly rents for apartments surged by 18.57% in Q3 2023 from a year ago, according to RICS. Likewise, house rents increased 12.8% over the same period.
The rent indices released by Ask Wire also showed apartment and house rents in the country rose by 13.3% and 9.2% y-o-y, respectively, in Q3 2023.
Yet the major Cypriot cities showed wide variations in rent movements during the year to Q3 2023:
- Nicosia, Cyprus’ capital, apartment rents rose by 5.5% y-o-y in Q3 2023 while house rents increased by a modest 3.2%, based on Ask Wire figures.
- Limassol recorded the biggest y-o-y rent increases in Q3 2023, of 25.3% for apartments and 24% for houses.
- In Larnaca, rents for apartments rose by 9.2% during the year to Q3 2023 and house rents increased by 5.3% over the same period.
- In Paphos, rents for apartments and houses increased by 11.1% and 6.7%, respectively.
- In Famagusta-Paralimni, average rents for apartments increased strongly by 15.8% y-o-y in Q3 2023 while house rents were up by 7.4%.
In Nicosia, monthly rents for apartments range from €600 (US$641) for one-bedroom apartments to €1,200 (US$1,282) for three-bedroom apartments, according to Global Property Guide. In Limassol, apartment rents can go as high as €1,400 (US$1,495) to €2,500 (US$2,670) per month.
Residential construction activity showed mixed results
During 2022, the number of residential building permits fell by 6.9% y-o-y to 7,604, following an increase of 16.2% in the prior year, according to the Cyprus Statistical Service. Likewise, total dwellings authorized dropped 6.3% y-o-y to 9,842 units last year, in contrast to the annual growth of 13.1% in 2021.
However, residential construction indicators showed mixed results this year, amidst the ongoing global supply chain disruptions and surging inflation. In the first eight months of 2023:
- No. of residential building permits: 3,198, down by 7.1% from a year earlier
- Area of residential building permits: 1,245,953 sq. m., up by a modest 3.7% from a year ago
- Value of residential building permits: €1.51 billion (US$1.61 billion), up sharply by 20.2% from Jan-Aug 2022
- Dwelling units authorized: 6,969 units, up by 5.5% from the same period last year
Dwelling stock in the country reached around 473,000 units early last year, up by 1.5 from the prior year, according to figures from the Cyprus Statistical Service.
Mortgage interest rates are now rising, following ECB rate hikes
Interest rates in Cyprus are now considerably increasing, following the successive rate hikes implemented by the European Central Bank (ECB) to tame inflation. As of September 2023, the following average housing loan rates applied in Cyprus:
- Interest rate fixation (IRF) of up to 1 year: 2.72%, up from 1.67% in the previous year and 1.5% two years ago
- IRF over 1 and up to 5 years: 4.01%, sharply up from 2.58% in September 2022 and 1.68% in September 2021
- IRF over 5 years: 4.25%, up from 2.43% a year earlier and 2.04% two years ago
Variable-rate mortgages account for about 98% of all housing loans in Cyprus.
In September 2023, the ECB decided to raise its key interest rates further by another 25 basis points, its tenth consecutive rate hike in just a span of fourteen months, in an effort to cool surging inflation in the region. The interest rate on the main refinancing operations was raised by a cumulative 450 basis points from July 2022, to reach 4.50% in September 2023. The interest rates on the marginal lending facility and the deposit facility were also increased to 4.75% and 4.00%, respectively.
Residential mortgage loans continue to fall
Cyprus’ residential mortgage market continues to shrink, amidst rising interest rates. In September 2023, the total value of housing loans outstanding fell by 5.2% y-o-y to €8.64 billion (US$9.23 billion), following declines of 1.3% in 2022, 4.3% in 2021, 1.8% in 2020, 1.5% in 2019, 22.2% in 2018 and 4.3% in 2017, according to the Central Bank of Cyprus.
In September 2023, by residence of borrower:
- Domestic residents: outstanding loans drawn fell by 4.6% y-o-y to €8.26 billion (US$8.82 billion)
- Euro-area residents: loans were down by 5.9% y-o-y to €27.9 million (US$29.8 million)
- Non-euro area residents: loans were down sharply by 17.4% y-o-y to €354 million (US$378 million)
Housing loans outstanding have been falling since 2012 when Cyprus’ banking system collapsed amidst the global credit crunch.
From 29.1% of GDP in 2005, the mortgage market grew to nearly 80% of GDP in 2014. But it has contracted sharply since to 68.2% of GDP in 2016, 44.6% in 2018, 42.7% in 2020 and finally to just 32.7% in 2022.
Home foreclosure moratorium extended again
In November 2023, 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 October 31 to December 31, 2023.
It is the latest in a series of such extensions, with the initial freeze dating back to August 2021.
The properties exempt from foreclosures include:
- Primary residences valued at up to €350,000 (US$357,428)
- Business premises with an annual turnover of up to €750,000 (US$765,917)
- Agricultural land plots valued at up to €100,000 (US$102,122)
“Our social sensitivity is shared with the government, with respect to borrowers which belong to vulnerable groups. At the same time, there is zero tolerance for strategic defaulters. We remain committed to an immediate, substantial and effective implementation of a framework that oversees foreclosure procedures,” said Andreas Kostouris, the spokesman of the country’s banking association.
Cyprus’ property title deeds fiasco
Property fraud in Cyprus is 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.
In fact, Deputy Chairperson of the House Standing Committee on Legal Affairs, Justice and Public and Disy MP Fotini Tsiridou commented that there are currently almost 100,000 property buyers in Cyprus who remain without their Title Deeds, according to a recent article published by Cyprus Property News in June 2023.
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 the 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.
“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 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 through 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, 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.
Currently, the government is studying a comprehensive solution to the issue of ‘trapped buyers’, which Akel MP Aristos Damianou described as “a scourge afflicting thousands of citizens in Cyprus, as well as third-country nationals, due to the bad and wrongful practices which were carried out between banks and developers.”
Cypriot economy is projected to slow, but public finances continue to improve
In Q2 2023, Cyprus’ seasonally-adjusted economic growth slowed to 2.3% from a year earlier, down from 3.4% in Q1 2023, 4.4% in Q4 2022, and 5.3% in Q3 2022, according to the Statistical Service of the Republic of Cyprus (Cystat). It was the ninth consecutive quarter of y-o-y expansion but the lowest in a row, amidst persistent inflationary pressures and rising interest rates.
In fact, on a quarterly basis, the economy contracted by 0.4% in Q2 2023, following a q-o-q growth of 0.8% in the previous quarter.
“The slowdown of economic activity started in the last quarter of 2022, and it is expected to continue through 2023,” commented the European Commission. “The economy is set to be dampened by the still high inflation eroding the purchasing power of households, by higher interest rates negatively affecting investment, and by weakening growth momentum in Cyprus’ trading partners affecting external demand.”
As such, the IMF expects the Cypriot economy to grow by just 2.2% this year, a sharp slowdown from annual expansions of 5.6% in 2022 and 6.6% in 2021. This is in line with the European Commission’s 2023 economic forecast for Cyprus of a 2.3% growth.
“Growth is projected to slow from 5.6 percent last year to 2½ percent this year. Recovery in tourism and an influx of foreign companies is set to continue, but elevated inflation and tighter financial conditions will weaken domestic demand. Price pressures—stemming from high energy prices in 2022—are expected to moderate but will persist for core inflation,” said the IMF.
In October 2023, nationwide inflation eased to 3.5%, down from 4.02% in the previous month and 8.8% in the same period last year, according to Cystat. Inflation surged to an average of 8.1% during 2022, from an annual average of just 0.6% in 2011 to 2021.
Cyprus recorded a budget surplus equivalent to 2.4% of GDP in 2022, a sharp improvement from deficits of 1.9% in 2021 and 5.7% in 2020, supported by robust revenue increases driven by continued economic growth, combined with a decline in pandemic-related support measures, according to the Cyprus Statistical Service (Cystat). The country’s government balance is expected to remain in surplus, equivalent to about 1.8% of GDP this year and to 2.1% of GDP in 2024, based on European Commission estimates.
As a result, gross public debt fell to 85.6% of GDP last year, sharply down from 99.3% in 2021 and 114.9% in 2020, according to the Eurostat. In fact, it is now below the 93% of GDP registered in 2019 before the pandemic. It is projected to fall further to 80.4% of GDP this year and to 72.5% of GDP in 2024.
The seasonally-adjusted unemployment rate in Cyprus stood at 6.2% in September 2023, down from 6.6% in the previous month and 6.7% a year earlier, according to Eurostat. From an average of just 4.8% from 2000 to 2011, unemployment surged to an average of 10.9% from 2012 to 2022, based on figures from the IMF.
- Residential Property Price Indices (Central Bank of Cyprus): https://www.centralbank.cy/en/publications/residential-property-price-indices
- The RICS Cyprus Property Index with KPMG in Cyprus (RICS): https://www.rics.org/news-insights/market-surveys/cyprus-property-price-index
- Foreign sales hit 16-year high (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/02/12/foreign-sales-hit-16-year-high/id=00167002
- Property sales reached 15 year high in the second quarter (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/10/27/property-sales-reached-15-year-high-in-second-quarter/id=00167890
- Property sales still growing (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/11/03/property-sales-still-growing/id=00167910
- Tourist Arrivals and Returns of Residents of Cyprus from Trips Abroad: June 2023 (Press and Information Office, Ministry of Interior): https://www.pio.gov.cy/en/press-releases-article.html?id=35990#flat
- Rental values rising across all property types (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/07/30/rental-values-rising-across-all-property-types/id=00167582
- Ask Wire Index: Q3 2023 (Ask Wire): https://ask-wire.com/ask-wire-index-q3-2023/
- Real Estate market of Cyprus in the first half of 2023 (Danos): https://danos.gr/2023/10/05/real-estate-market-of-cyprus-in-the-first-half-of-2023/
- Construction (Statistical Service of the Republic of Cyprus): https://www.cystat.gov.cy/en/SubthemeStatistics?id=31
- Monetary and Financial Statistics – Year 2023 (Central Bank of Cyprus): https://www.centralbank.cy/en/publications/monetary-and-financial-statistics/year-2023
- Monetary policy decisions (European Central Bank): https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.mp231026~6028cea576.en.html
- Key ECB interest rates (European Central Bank): https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html
- Building Permits: August 2023 (Statistical Service of the Republic of Cyprus): https://www.cystat.gov.cy/en/PressRelease?id=66895
- Foreclosures freeze extended to the end of the year (Cyprus Mail): https://cyprus-mail.com/2023/11/01/foreclosures-freeze-extended-to-the-end-of-the-year/
- No foreclosures on first homes until the end of 2023 (K News): https://knews.kathimerini.com.cy/en/news/no-foreclosures-on-first-homes-until-the-end-of-2023
- Foreclosure Moratorium Set to Stay (Lawyers in Cyprus): https://www.lawyersincyprus.com/news/articles/foreclosure-moratorium-set-to-stay
- 100,000 still waiting for Title Deeds (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/06/22/100000-still-waiting-for-title-deeds/id=00167469
- Held hostage by the struggle to get title deeds (Cyprus Property News): https://www.news.cyprus-property-buyers.com/2023/04/11/held-hostage-by-struggle-to-get-title-deeds/id=00167248
- Economic forecast for Cyprus (European Commission): https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/cyprus/economic-forecast-cyprus_en
- National Accounts (Statistical Service of the Republic of Cyprus): https://www.cystat.gov.cy/en/SubthemeStatistics?id=45
- Cyprus (International Monetary Fund): https://www.imf.org/en/Countries/CYP
- GDP Growth Rate - Growth Rate 2,1% 2nd Quarter 2023 (Flash Estimate) (Statistical Service of the Republic of Cyprus): https://www.cystat.gov.cy/en/PressRelease?id=68072
- Cyprus: 2023 Article IV Consultation-Press Release; and Staff Report (International Monetary Fund): https://www.imf.org/en/Publications/CR/Issues/2023/06/05/Cyprus-2023-Article-IV-Consultation-Press-Release-and-Staff-Report-534261
- Consumer Price Index - Inflation 3,5% Oct 2023 (Statistical Service of the Republic of Cyprus): https://www.cystat.gov.cy/en/PressRelease?id=67019
- Euro area unemployment at 6.5% (Eurostat): https://ec.europa.eu/eurostat/documents/2995521/17791746/3-03112023-AP-EN.pdf/7de0add9-2fd1-b656-b90d-63aaa97f72ff
- Gross rental yields in Cyprus: Limassol, Nicosia, and Paphos (Global Property Guide): https://www.globalpropertyguide.com/europe/cyprus/rental-yields