Panayiotis Rougalas
DANOS, a prominent real estate consulting agency, hails 2022 as a remarkable year for Cyprus real estate, breaking through the economic challenges and awakening from the post-COVID stagnation. According to a report released on Friday, the total value of property transactions in Cyprus surged to €5.85 billion. This encompassed various property categories, such as residential, commercial, land, and buildings. Specifically, residential units, including apartments and houses, contributed nearly €4 billion to this sum, showcasing a remarkable 30% year-on-year surge in sales.
Comparing these figures with data from the previous year, the growth is substantial and marks the most impressive result since 2008. DANOS highlights the widespread growth across Cyprus, with Paphos leading the way, experiencing a 58% increase in total sales and a staggering 79% surge in overseas transactions.
The island's timeless appeal continues to attract global property investors, particularly in Limassol and Paphos, which stand out as top choices for foreign buyers, both from the EU and non-EU countries. The report distinguishes Paphos for its villa and residential market dominance, attributed to its picturesque location, stunning vistas, pleasant climate, and unique ambiance. On the other hand, the report labels "cosmopolitan" Limassol as the epicenter of luxury apartments and prominent seaside towers.
"Nicosia boasts a more modest yet steady market, catering to students, business proprietors, and civil servants," the report notes.
With a total of 22,500 transactions
Diving deeper into the statistics, DANOS reports that the overall count of property transactions in 2022 surged to a remarkable 22,500, a notable increase from the 20,100 transactions recorded in 2021, showcasing a substantial 12% growth. This surge also surpassed the pre-pandemic peak of 2019, which recorded 17,200 transactions, marking a remarkable 31% increase.
During the course of 2022, the coastal regions, particularly Limassol, Larnaca, and Paphos, exhibited a robust growth in terms of transaction volumes, each experiencing double-digit annual increases in comparison to 2021. Limassol led the charge with an impressive 18% surge, followed closely by Larnaca with a notable 23% increase, and Paphos taking the lead with an exceptional 31% boost in transactions. However, the districts of Nicosia and Famagusta saw marginal dips of 6% and 1%, respectively.
Within these trends, Limassol maintained its position as the frontrunner, accounting for a significant 31% of the total transaction volume. Nicosia closely followed, contributing 27% of the transactions, consolidating its role as a pivotal driver of transaction volume in 2021.
Recording 7,600 residential transactions
Looking at the specifics, the total count of residential property transactions reached an impressive 7,600 in 2022, showcasing a substantial 19% surge compared to the previous year. This surge also reflects a significant 41% increase when compared to the pre-pandemic levels of 2019.
In terms of transaction value, this segment amassed a total of €1.3 billion in 2022, constituting a substantial 25% share of the overall transaction value for the year. It's worth noting that during 2021, residential prices saw a 3% uptick in comparison to the figures of 2020.
The report indicates that throughout the third quarter of 2022, index prices maintained their upward trajectory, registering a 6% annual increase, which also marked a 5% boost in comparison to the final quarter of 2021. On the front of building material prices, the Company highlights that these prices exhibited a consistent upward trend across both 2021 and 2022, culminating in a 30% rise over the two-year period. In the context of 2022, building material prices witnessed a 17.2% increase.
Demand for office space on the rise
The report highlights an upswing in demand for business spaces across Europe in the aftermath of the pandemic. This surge in demand has led to higher asking rents and a partial price correction triggered by increasing interest rates. The robust demand is largely driven by businesses aiming to bring their workforce back to physical offices, resulting in elevated financing costs and a rise in high-cost yields.
Substantial investments are currently being channeled into the office market, with 70,000 sqm of space under construction and an additional 14,000 sqm in the planning stage. This marks a significant push to bridge the gap in new developments that emerged over the past decade, with a projected total of 84,000 sqm of new office space set to materialize by 2024-2025.
Despite the pandemic and the prevalence of remote work, industry executives remain optimistic about the market's future prospects. The demand for modern and environmentally-friendly offices, commonly referred to as "green offices," is notably high. The latter half of the previous year witnessed a remarkable feat, as office absorption—measured by new leases—reached a record-breaking 25,000 sq m.
This development underscores the notion that, despite the pandemic's impact and the prevalence of telecommuting, the majority of companies still prefer a physical presence for their workforce, even if limited to a few days a week. DANOS highlights that this heightened demand is also mirrored in rental prices, with Nicosia commanding a monthly rate of 23 euros per sqm and instances in Limassol reaching levels of 45 euros per sqm.
Concerns about older properties
A potential challenge on the horizon for the office space market pertains to the fate of older properties that are becoming vacant as companies—both multinational and non-multinational—along with the general public, opt to shift to newly constructed or planned buildings. The properties in question, primarily erected during the 1990-2010 timeframe, could present a conundrum as they may necessitate substantial capital investment to undergo energy-efficient upgrades, a prerequisite to remain attractive to prospective tenants.
Alternatively, exploring the option of altering their purpose is also plausible; however, this endeavor is not without its complications. "The question of how this inventory of properties will be repurposed in the forthcoming years remains unanswered, awaiting a satisfactory resolution," he concludes.
[This article first appeared on Oikonomiki and was translated from its Greek original]
