With local purchasing power curbed by high mortgage rates, the Cypriot real estate market is now stabilizing after a period of strong growth in sales and rental prices driven by robust demand and significant foreign investment.

This extended overview from the Global Property Guide covers key aspects of Cyprus's housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Mortgage Market
• Rental Market
• Socio-Economic Context

Housing Market Snapshot

In Cyprus, the residential property price index in 2023 showed a year-on-year growth that gradually picked up pace from 7.66% (1.76% inflation-adjusted) in Q1 and reached 8.28% (6.54% inflation-adjusted) in Q4, according to the latest data from the Central Bank of Cyprus - making this year the first annual increase period for the inflation-adjusted prices since 2021.

Cyprus's house price annual change

In terms of price dynamic by property type, apartments demonstrated a higher growth of 12.7% year-on-year (10.9% inflation-adjusted), while houses grew more moderately at 5.7% year-on-year (4.0% inflation-adjusted) as of Q4 2023.

Regional price development remained uneven, the highest year-on-year growth of 11.0% (9.2% inflation-adjusted) was registered in the Larnaca district, followed by Limassol with 10.7% (8.9% inflation-adjusted) and Famagusta - 9.5% (7.8% inflation-adjusted). The slowest pace of growth was registered in the capital district of Nicosia - 5.1% year-on-year (3.4% inflation-adjusted).

Residential property price index dynamic in key submarkets:

Data Source: Central Bank of Cyprus

CEO of Ask Wire, a Cypriot company providing real estate intelligence and analytics, identifies geopolitical turmoil, inflation, and high mortgage rates as major factors currently influencing housing prices in the country: "High mortgage rates are likely to persist, reducing local purchasing power and stabilizing market prices as demand adjusts. We expect growth in investment property prices to slow down in the second quarter of 2024 and beyond".

As growth in rent rates eased to 9.26% year-on-year for apartments and 6.37% for houses, compared to the corresponding quarterly average of 15.35% and 10.74% in 2023 reported by Ask Wire Rental Index, rental yields stabilized. According to research carried out by Global Property Guide in June 2024, gross rental yields for apartments in Cyprus averaged 4.57%, slightly down from the previously reported figure of 4.91% in July 2023.

Residential sales, having peaked in 2023, are also seen to show signs of stabilization moving into 2024. 6,231 property sales contracts were registered in the first five months of the year, indicating a marginal decrease of less than 1% compared to the corresponding period in 2023. Notably, domestic sales registered 12.20% growth, while overseas sales slumped 16.5%, translating into an uneven district-specific performance with the coastal areas of the island such as Paphos and Limassol (generally preferred by overseas buyers) facing declines in activity.

Despite a marginal decrease in interest rates on new loans with a floating rate and an IRF of less than 1 year, the annual percentage rate of charge on mortgages, used by the Central Bank of Cyprus to measure the actual cost of loans, increased. At 5.15%, the indicator notably exceeds the eurozone average, as well as comparable 2023 and 2022 levels.

Increasing occupancy of Cyprus's housing stock indicates a tilt towards demand in the demand-supply balance of the market, pushing housing prices up. Despite a slight decrease in residential building permits authorized in 2023, there was a rise in both the number of dwellings and the value of permits, suggesting a shift towards larger, multi-unit developments. The trend continued into early 2024.

Overall Cypriot economy, supported by robust policies, has demonstrated resilience to multiple adverse shocks. Although moderated to 2.5% in 2023, the country's GDP growth was supported by domestic demand and rising employment in an environment of inflation approaching target levels and declining to 2.9%. The 2024-2025 outlook remains positive, as economic activity is expected to grow on the back of strong domestic consumption and further improving net exports.

Historic Perspective:

International Policy Measures and Foreign Investment Shaping the Landscape

Over the past two decades, the development of Cyprus's housing market has been marked by significant fluctuations. From 2000 to 2008, the market experienced a substantial boom, with house price growth peaking at 22.1% year-on-year in Q4 2007 (17.46% inflation-adjusted). During this period, the number of new dwellings increased by 10.3%, driven by strong economic growth, heightened foreign investment (particularly from Russia and the UK), Cyprus's accession to the EU in 2004, and easy access to credit.

However, the global financial crisis of 2008 triggered a sharp decline in the housing market, which was further exacerbated by Cyprus's banking crisis in 2012-2013. This led to economic contraction and austerity measures that suppressed domestic demand. The steepest decline in house prices, exceeding 8% year-on-year, was recorded in 2013-2014, with new construction plummeting by an average of 35.4% during the period. The market bottomed out in 2016.

Starting in 2017, recovery began with prices increasing at an average annual rate of 2.15% between 2017 and 2019 (1.54% inflation-adjusted). Concurrently, the growth rate of new dwellings volume added to the stock averaged 20% annually. This resurgence was fueled by the thriving tourism sector, increased demand for rental properties, and continued strong foreign demand, especially from non-EU countries (particularly through the citizenship-by-investment program). Additionally, improved economic conditions, marked by declining unemployment and rising consumer confidence, contributed to the market's recovery.

In more recent years, the housing market has sustained this dynamic despite the initial uncertainty caused by the COVID-19 pandemic. Property prices continued to demonstrate positive, even though limited, growth, and new construction remained active. The economic rebound, driven by ongoing foreign investment and new infrastructure projects, has maintained the upward trajectory of property prices, even though growth in real terms remained hindered by high inflation. At the end of 2023, the nominal residential index increased by a strong 8.28% year-on-year marking the first instance of positive inflation-adjusted growth since 2021.

20-year annual house price change (based on end-of-year residential property price index and consumer price index):

Historic residential construction activity (newly completed dwellings):

Data Source: CYSTAT

Demand Highlights:

Growth Rate Eases as Sales Stabilize

The growth in property sales in Cyprus remains robust, albeit with a noticeable slowdown in its pace. According to the figures of the Department of Lands & Surveys, in 2023, the country saw a total of 15,567 registered real estate sales contracts, marking a year-on-year increase of 16.1%. Even though substantial, this growth rate still represents a slowdown compared to the almost 30% acceleration observed in the post-pandemic period of 2021-2022.

44% of sales were attributed to overseas buyers, highlighting the importance of foreign capital for the country's property market. Since the beginning of the year, foreign property sales totaled 6,900, demonstrating an increase of 16% year-on-year driven by demand from non-EU citizens, which almost doubled (+46%) compared to the corresponding period of 2022. The ratio between domestic and foreign property buyers remained broadly stable from 2018 to 2023, with the only exception being 2020 and 2021, heavily impacted by the COVID-19 pandemic and associated travel restrictions.

According to Deloitte insights, the majority of foreign buyers invest in properties located in Limassol and Paphos, a more recent increase in interest was also recorded in Larnaca. Investor profiles vary across the districts with Paphos attracting more investments related to holiday homes, whereas Limassol and Larnaca represent a more balanced blend between residential for investment purposes and commercial.

Note: Statistics include residential and commercial (retail, office, and warehouse) properties and land.

Data Source: Department of Lands & Surveys

In terms of residential investment market activity, 2023 marked a record high in both the volume and value of transactions, according to the latest data reported by Deloitte. However, similarly to the overall real estate investment trends, the pace of acceleration has shown signs of a slowdown. Throughout 2023, Cyprus recorded 13,151 residential transactions, demonstrating a 4.1% year-on-year growth compared to 29.2% in 2022 and 22.9% in 2021. Similarly, investment volumes increased by 4.6% to €3.4 billion, compared to 50.6% year-on-year growth in 2022 and 15.5% in 2021.

Anastasia Yianni, CEO of Sotheby's International Realty Cyprus, commented: "The year 2022 was one of the most successful for the Cyprus property market in the past decade with impressive sales volume numbers as the post-covid lethargy had ended. It was no surprise that after such an incredible growth we saw the market stabilizing."

Note: Real estate market activity was based on the Deloitte analysis of data and information extracted from the DLS database on 18 January 2024. Transactions relate to both Contracts of sale ("CoS"), and sale transfers.

Data Source: Department of Lands & Surveys, Deloitte analysis

According to Deloitte insights, the average residential transaction value in 2023 was estimated at €259,000, slightly above the €257,000 recorded in 2022 but below the peak of €271,000 in 2019. In terms of the regional leaders, Limassol accounted for 43% of the total market activity by value with €1.5 billion in sales across 3,700 transactions. Paphos followed with €0.7 billion in total deals value from 2,800 transactions.

Newly built properties, for which title deeds have yet to be issued, represented 69% of the total transaction value. Apartments made up 62% of the total value and 72% of the total number of transactions. The ratio between apartments and houses, both in value and volume, remained consistent with 2022 and 2021 levels. Most apartment sales involved 2-bedroom properties, followed by studios and 1-bedroom units. The majority of houses sold were under 200 sqm and mainly involved terraced developments.

As for the unit price distribution, the highest proportion of sales was attributed to the properties priced under €250,000 - 77% of apartments and 46% of house sales. However, house sales were significantly more equally distributed between the different price ranges.

Data Source: Department of Lands & Surveys, Deloitte analysis

Moving into 2024, the trend of a slowdown in growth persists. 6,231 property sales contracts were registered in the first five months of the year, indicating a marginal decrease of less than 1% compared to the corresponding period in 2023. Notably, domestic sales registered 12.20% growth, while overseas sales slumped 16.5%, translating into an uneven district-specific performance with the coastal areas of the island, such as Paphos and Limassol, (generally preferred by overseas buyers), facing declines in activity.

Registered Contracts of Sales (Jan 2024 - May 2024):

Nigel Howarth, reporting for the Cyprus Property News, cited a recent revision of legislation governing permanent residency in Cyprus through investment as a factor possibly impacting overseas buyer activity. These revisions, in place since May 2023, introduced control mechanisms to ensure that applicants maintain their investment on a permanent basis. At the same time, Howarth notes, the country's Parliament is currently discussing a new legislation to replace the current application process. The proposed changes include lowering the investment threshold from €300,000 to €250,000 and reducing the annual income requirement from €50,000 to €40,000 for the applicant, with an additional €10,000 required for each dependent (currently set at €15,000 for a spouse and €10,000 per child).

Delfi Partners & Co attributes the slowdown to dual electoral contest both at the European and self-governing levels, high interest rates, and inflationary pressures that continue to shrink the disposable income of potential investors, as well as the conflicts in Ukraine and the Middle East. The publication highlights that despite the marginal downward trend during the period, in relation to 2019, the sales contracts have registered a rise of 29%. The company's director Michalis Tsangarides, quoted by the Cyprus Mail, indicated that marginal fluctuations suggest the market's ability to withstand pressures and turbulence.

Supply Highlights:

Prices Driven by Supply Constraints and a Trend Towards Multiple-Unit Buildings in New Developments

CYSTAT reports that 7,170 residential building permits were authorized in Cyprus in 2023, reflecting a 5.7% year-on-year decrease. Nevertheless, both the number of dwellings authorized and the value of permits increased by 12.2% and 16.4%, respectively, indicating a shift in construction activity towards larger projects with multiple units per development.

Data Source: CYSTAT

A similar pattern continued in 2024, with 1,876 building permits authorized during the first three months, marking a modest 3.3% increase compared to the corresponding period in 2023. Concurrently, the value of these permits rose by 12.24%, and 20.73% more units were authorized. In terms of the regional distribution, the highest activity levels were recorded in Nicosia and Limassol districts.

Residential Permits Authorized (Jan 2024 - Mar 2024):

According to the latest data published by CYSTAT, as of 2022 dwelling stock in the country reached 482,000 units demonstrating year-on-year growth of 1.9%, slightly higher than the average of 1.1% in the preceding ten years. CEO of Ask Wire Pavlos Loizou, quoted by Cyprus Mail, expects further significant increases in residential supply in the medium term, as construction projects initiated during the boom period come to completion easing an upward pressure on property prices.

Based on Ask Wire's research, 541 apartment buildings were under construction in 2023. The largest number of projects were registered in the Limassol district (198 apartment buildings), followed by Nicosia (165), and Larnaca (127). Districts of Paphos and Famagusta demonstrated double-digit numbers of projects, highlighting the local disparities characterizing the Cypriot market.

CYSTAT Census data indicates an increase in permanent occupancy rates in residential dwellings from 69% in 2011 to 72% in 2021, suggesting the demand-supply matrix of the market tilting towards demand. Paphos and Famagusta maintained a significant percentage of empty/second homes, at 48% and 46% respectively, suggesting their potential roles as vacation or investment hotspots. However, Ask Wire analysts note that the numbers have been significantly skewed from 2022 onwards, when Cyprus saw an influx in population from Ukraine, Russia, Belarus, Lebanon, and Israel. According to their data, an estimated 30,000-40,000 persons have moved to the country since, primarily in the coastal cities of Limassol, Larnaca, and Paphos.

Loizou commented on the effects of construction activity on the overall housing market dynamic: "One of the primary reasons for the increase in residential property prices is the law of the market itself, which dictates that values rise when demand exceeds supply. Additionally, the inability of many to buy a house or apartment leads to renting, resulting in overheating of demand and the rental market. Therefore, the burning question is how much the supply of residential properties will increase and when".

Mortgage Market:

Elevated Interest Rates Putting Strain on Domestic Affordability

In May 2024, the interest rate for new floating-rate loans and loans with an IRF of up to 1 year in Cyprus fell slightly, decreasing by 0.17 p.p. from the previous quarter, according to the latest data from the Central Bank of Cyprus (CBC). However, the annual percentage rate of charge, used by the CBC to measure the actual cost of loans, rose by 0.03 percentage points, indicating that mortgage costs have not yet stabilized. At 5.15%, the annual percentage rate of charge on new housing loans in May 2024 notably exceeded the 3.76% eurozone average, as well as comparable 2023 and 2022 levels.

Interest rates on new housing loans:

It remains to be seen how the further cuts of the ECB repo rate reduced in June after numerous consecutive increases over the last two years will affect the housing loans market in Cyprus.

Data Source: CBC, ECB

Similarly, the average interest rate for outstanding housing loans has shown a year-on-year increase and was recorded in May 2024 at 4.64% for loans with maturity of over 5 years, against 3.80% in May 2023 and 2.06% in May 2022.

Interest rates on outstanding housing loans by original maturity:

Data Source: CBC

According to data published by the European Central Bank, as of May 2024, 58% of mortgages in Cyprus involved variable rate loans, marking it one of the highest shares of flexible rate mortgages in Europe and thus more vulnerable to short-term interest rate fluctuations. Even though tampering with local demand for housing, the impact of higher mortgage rates is however somewhat mitigated by robust external demand with foreigners accounting for close to half of the residential sales.

In terms of the volume of new loans, the Central Bank of Cyprus reported a drop in new mortgage loans in May 2024 compared to the previous year. New loans for house purchases (including new loan contracts and contracts renegotiated within the reference month) decreased to €119.7 million (including €92.2 million in pure new loans), down from €123.8 million in the previous month (including €90.1 million in pure new loans). Year-on-year figures show a more significant 19.2% decrease in all new loans for house purchases and a 12.0% decrease in pure new loans.

Meanwhile, the total value of outstanding housing loans remained stable at €8,645.6 million, showing only a 0.6% year-on-year decrease.

Data Source: CBC, CYSTAT, Global Property Guide

Rental Market:

Yields Stabilize as Rent Growth Starts to Moderate

According to the latest data from RICS, as of Q1 2024, average gross rental yields in Cyprus were recorded at 5.44% for apartments and 2.97% for houses. Both property types experienced a year-on-year increase compared to 2023, when yields were 5.38% and 2.86%, respectively. This dynamic is also supported by recent research from Global Property Guide, which in June 2024 registered the country's average gross rental yield at 4.57%. In quarter-on-quarter terms, however, yields for both apartments and houses demonstrated marginal decreases of 0.04 p.p. and 0.02 p.p. respectively, indicating the market entering a stabilization phase, as reported by RICS.

Note: As of the last quarter of the year, unless stated otherwise

Data Source: RICS

According to the Eurostat research, the rate of home ownership in Cyprus continues to fall. As of 2023, 68.8% of households owned the property they were residing in, compared to 72.9% in 2014. Economist Haris Polycarpou, quoted by the Knews comments: "In the current landscape, an average family, with worker incomes near or below €1,500, struggles to secure a mortgage due to repayment capacity. With current interest rates, it would take almost half a century to repay the mortgage, rendering homeownership an impractical dream. Renting, on the other hand, becomes a financial strain, with rents requiring a significant portion of one or both salaries for most couples."

The Cypriot rental prices continue to surge. RICS reports a year-on-year rental increase of 10.57% for apartments and 9.55% for houses as of Q1 2024. Similarly, Ask Wire notes a slightly more modest 9.3% year-on-year rise in the Rental Index for apartments and a 6.4% for houses. In line with the sales price dynamic, the pace of this growth however demonstrates a slowdown compared to an average quarterly growth rate of 15% for apartments and 11% for houses in 2023.

Regional activity is uneven, with the highest rental rate increases recorded in the Limassol district, significantly surpassing those in other districts and well above the national average.

Ask Wire Rental Index in key submarkets as of Q1 2024, Q1 2018 = 100:

Data Source: Ask Wire

Socio-Economic Context:

Economic Growth to Continue, Supported by Strong Domestic Demand and Fiscal Discipline

In 2023, real GDP growth in Cyprus moderated at 2.5%. According to the European Commission analysis, robust domestic demand, particularly consumption, was driven by rising employment and disposable incomes amid declining inflation. Net exports, on the other hand, significantly hindered growth, primarily due to a substantial decline in exports of financial and professional services caused by geopolitical tensions, while imports surged with increased consumption and investment. A further upward trajectory is expected on the back of persistently strong domestic demand and improving exports with the real GDP growth forecasted at 2.8% in 2024 and 2.9% in 2025.

Nationwide inflation, measured by the Consumer Price Index (CPI), continues to stabilize, reaching 2.9% year-on-year in June 2024, slightly up from 2.7% the previous month, but significantly below the year-end peak of 8.1% in 2022, according to CYSTAT data. The European Commission projects further deceleration, with headline inflation reaching 2.4% in 2024 and 2.1% in 2025.

Data Source: IMF

In 2023, Cyprus's current account deficit reached an unprecedented 12.1% of GDP. Although declines are forecasted, the indicator is still expected to stay elevated at 11.2% in 2024 and 10.8% in 2025. The widening of the trade deficit is primarily due to Cyprus's reliance on energy imports and the import of consumption and investment goods, particularly amid high energy prices. Additional influence factors include the repatriation of profits by foreign-owned companies, including banks, and increasing primary income outflows.

The general government surplus rose to 3.1% of GDP, up from 2.7% in 2022. This increase was driven by double-digit revenue growth from tax-rich sources such as consumption and rising wages, which outpaced robust expenditure growth driven by higher public wages and social spending. However, measures to mitigate the impact of high energy prices slightly reduced the budget balance, with a net budgetary cost of about 0.4% of GDP. The European Commission forecasts the budget to maintain a surplus of 2.9% of GDP in 2024 remaining steady in 2025. The general government debt-to-GDP ratio is expected to drop significantly over the forecast horizon from 77.3% in 2023 to 65.4% in 2025 mainly thanks to primary surpluses combined with continued strong nominal GDP growth.

Data Source: IMF

Cyprus's labor market is strong, serving as one of the key factors supporting the ongoing macroeconomic growth. In the first quarter of 2024, the unemployment rate in the country was registered at 6.0%, according to the Labor Force Survey figures provided by CYSTAT, down from 6.8% in the corresponding period of 2023. European Commission forecasts the unemployment rate to continue a downward trajectory reaching 5.6% in 2024 and 5.4% in 2025, expecting the labor force to be reinforced by foreign workers as domestic labor shortages persist.

Overall, the Cypriot economy has shown resilience, and the outlook remains favorable. In its Mission Concluding Statement IMF summed up: "Supported by robust policies, Cyprus recovered swiftly from the pandemic, and has proved broadly resilient to multiple adverse shocks. Growth is above most European peers, and inflation is close to 2 percent. Fiscal performance continues to be strong, significantly reducing public debt". Moving forward, maintaining fiscal discipline with sustained surpluses, resisting wage indexation, ensuring financial sector vigilance, strengthening the judiciary and education systems, and implementing vital climate policies are considered key priorities.

Sources:

1. Cyprus Statistical Service (CYSTAT)
   1. Construction Market Indicators: https://www.cystat.gov.cy/
   2. National Accounts: https://www.cystat.gov.cy/
   3. Price Indices: https://www.cystat.gov.cy/
   4. Population and Housing Census 2021: https://www.census2021.cystat.gov.cy/
   5. Consumer Price Index June 2024: https://www.cystat.gov.cy/
   6. Labour Force Survey Q1 2024: https://www.cystat.gov.cy/
2. Central Bank of Cyprus (CBC)
   1. Residential Property Price Indices: https://www.centralbank.cy/
   2. Statistics on Interest Rates applied by Monetary Financial Institutions: https://www.centralbank.cy/
3. Department of Lands & Surveys
   1. Statistical data on transfers of sales and sales contracts: https://portal.dls.moi.gov.cy/
4. European Central Bank (ECB)
   1. ECB Data Portal: https://data.ecb.europa.eu/
   2. Key ECB interest rates: https://www.ecb.europa.eu/
5. International Monetary Fund (IMF)
   1. Country Overview: Cyprus: https://www.imf.org/
   2. Cyprus: Staff Concluding Statement of the 2024 Article IV Mission: https://www.imf.org/
6. European Commission
   1. Economic forecast for Cyprus: https://economy-finance.ec.europa.eu/
7. Eurostat
   1. Distribution of population by tenure status, type of household, and income group - EU-SILC survey: https://ec.europa.eu/
8. Organization for Economic Co-operation and Development (OECD)
   1. OECD Data Explorer: https://data.oecd.org/
9. Deloitte Global
   1. Cyprus Real Estate Review 2023. An analysis of the real estate market: https://www.deloitte.com/
10. RICS
    1. RICS Cyprus Property Index
    2. with KPMG in Cyprus: https://www.rics.org/
11. Ask Wire
    1. Ask Wire Index Q1 2024: https://ask-wire.com/
    2. Cyprus: More people, smaller families, more homes, less holiday homes: https://ask-wire.com/
12. Sotheby's International Realty Cyprus
    1. Insights FY 2023: https://www.cyprus-sothebysrealty.com/
13. Delfi Partners & Co
    1. Real estate: Sales in Cyprus are moving at last year's levels: https://delfianalytics.com/
14. Cyprus Property News
    1. Overseas buyer's interest in Paphos & Limassol waning: https://www.news.cyprus-property-buyers.com/
    2. Cyprus property market continues to be sustained by foreign buyers: https://cyprus-mail.com/
15. Cyprus Mail
    1. Cyprus Property Market: recent trends and future outlook: https://cyprus-mail.com/
16. In-Cyprus News
    1. 541 apartment buildings under construction since 2023: https://in-cyprus.philenews.com/
17. Knews
    1. Cyprus housing crisis deepens amid interest rate scandal: https://knews.kathimerini.com.cy/