Marinos Keynegirou, the president of the Real Estate Registration Council, warns of escalating prices and dwindling demand in the real estate market's fourth quarter. He points out that these high prices are discouraging foreign investors, specifically Israelis and Lebanese, who are opting for more affordable locations, including occupied territories. Keynegirou emphasizes the significant risk of potential property vacancies, creating what he describes as a "perfect storm" in the real estate sector.
- You mentioned in a recent article that the real estate market has slowed down, and there are signs of stagnation. What is your basis for this statement?
- As you rightly pointed out, we have documented that the real estate market in Q4 2023, or if you prefer, in the last quarter of the year, has slowed down significantly compared to the performance recorded up to Q3. As the Land Registry Council, we expected the market to pick up speed, and it was something we highlighted as part of the Department of Land Registry and Surveying's comparative sales analysis published each quarter. Demand, both from the domestic market and overseas buyers, is affected by high prices. As you are well aware, prices had increased, especially after the war that broke out in Ukraine at the beginning of 2022, for reasons such as the cost of raw materials and construction materials, energy costs, and general inflation. At the same time, we had low supply despite increased demand. But the prices we see today have, in our view, gone beyond the bounds of reason. I know it may sound a bit harsh, but excessively high prices are pushing foreign investors to the occupied territories and other destinations where prices are lower. Many say we were affected because of the war in Gaza. We do not agree with this view because we simply see Israelis and Lebanese investing more and more in the occupied territories of our country.
- What do the figures on property sales show?
- During the period January-September 2023, the real estate sector maintained its momentum despite the accumulated challenges it faced. As demonstrated by the comparative sales data of the Department of Cadastre and Land Surveying, processed and presented quarterly by the Board of Registration of Real Estate Agents, in the first nine months of 2023, there were 8,681 property transfers with a total value of €1.4 billion and 9,374 sale documents with a total value of €3.3 billion. Looking at the values, Limassol is the strongest province, recording €462 million in transfers and €1.85 billion in sales documents in the nine months. Nicosia province recorded the most property transfers worth €409 million but is fourth in sales documents, both in terms of transaction volume and value. Paphos province maintained its momentum, recording a total of 1,063 transfers worth €165.3 million and 2,027 sales documents worth €632 million in the first nine months of 2023. Larnaca province recorded a strong performance in the January-September period with 1,850 transfers worth €266 million and 1,892 deeds of sale worth €383 million. Famagusta province, despite its small size, showed stability, with 497 transfers worth €93 million and 347 deeds of sale worth €82 million. Now the picture has changed, and you will see this in our next analysis of comparative sales, which will be published just after the holidays.
The new VAT and the war in Israel
- How has the new VAT on property affected the market? Has demand for second-hand or smaller properties increased?
- This is another issue, adding to what I have described earlier. Over time, we will see a change in trend and a shift to smaller properties because the cost of VAT is not negligible.
- Has the property market in Cyprus been affected by the war in Israel and to what extent?
- It has certainly been affected, but this is not the main reason why we see the interest of foreign buyers decreasing. The main reason is the exorbitant prices being asked by property owners. If you follow the Turkish Cypriot press, you will see the reactions that the mass exodus of Israelis is causing in the occupied territories. Do they not come here because of the war, and do they go to the occupied territories?
Hundreds of cases of illegal real estate agents
- You often mention the presence of illegal estate agents in the market. Is the number of unlicensed ones increasing? And what does it mean for a buyer/tenant to find a property from an unlicensed real estate agent?
- It is a problem that is plaguing the real estate profession. We take hundreds of cases to court every year following complaints from citizens, industry professionals, or the detection of illegality by Council inspectors. As a Council, we use all the weapons available to us under the law to deal with the illegal and protect the profession. You ask what it means for a prospective buyer/tenant. It means taking a dangerous risk of becoming a victim of fraud. You, as a media functionary, can easily confirm how often police press releases come to your email with wanted persons who posed as real estate agents and disappeared with down payments. So people need to be careful and check who they are dealing with. It is very important to ask individuals who introduce themselves as estate agents for their annual license or professional identity card for the current year. Confirmation of details can be done quickly and easily via the Estate Agents Registration Council's website, "ktimatomesites.com." To confirm details or make a complaint, a Council officer can be contacted by telephone at 22666377, fax at 22518490, or email info@ktimatomesites.com.
To avoid unpleasant situations, we urge the public to use the Council's online property platform, (ktimatomesites.com). The platform is a benchmark for reliable transactions and opportunities, as buyers can only search and locate properties from licensed real estate agents.
A salary is needed for rent
- How is the demand for rental properties shaping up?
- Unfortunately, we are seeing rental rates that approach or even exceed a monthly salary. As the Landlord Registration Council, we raised the whole issue two years ago and called on the then government to take action, which we did immediately after the current government came to power. So we predicted that the higher the prices for buying a home, the more people would turn to renting, and as a result, the problem would become even more acute. We now have perfect storm conditions before us. House purchase prices are soaring, banks often reject young couples wishing to take out a loan to buy a house or flat as unviable, lending rates are soaring, and general accuracy is restricting disposable income. The result is - as we predicted - soaring rental prices. If you add into the equation the new trend for property owners to dispose of their houses and flats on short-term leases, then you can appreciate the scale of the problem and its complexity.
- Where are rental and property market prices currently fluctuating by province?
- Where have prices moved upwards on both the rental and market side? The most significant increases have been recorded in the city and the suburbs of Limassol, without, of course, meaning that there are no increases in the other provinces of free Cyprus. For a single apartment in Limassol, the rent is around €1,000, significantly more expensive than in other cities. The picture is similar for both two- and three-bedroom apartments. In terms of prices to buy, there are also noticeable differences in prices, in the first year of Limassol and in the second year of Nicosia compared to those found in Larnaca and Paphos.
- Are the increases considered unjustified?
- The increases are not entirely unjustified, as I explained at the beginning of our discussion; they are largely due to the increase in construction costs. However, recently we have seen increases imposed that have nothing to do with these costs, as we see owners setting excessively high prices because there is demand. Yes, but demand comes and goes. If you look at the findings recently published by Eurostat, you will see that the percentage of Cypriots owning their own home is falling. Many are even returning to their parents' homes as they are unable to buy or rent. At the same time, as I said at the beginning, excessively high prices are driving away investors and buyers, mainly from third countries.
Source: Comparative sales of the Department of Survey and Land Registry - Edited by the Board
- What measures could be taken to limit the upward trend?
- It is necessary to rationalize prices. Our plea to landlords is to return to reason and stop looking at temporary profit. Stop looking at the tree and look at the forest. This is where the key to solving the problem lies; otherwise, we risk leading to excessive "overheating" of the market. The government has recently announced some affordable housing measures. Unfortunately, we do not see them changing the picture in the market so far.
- What are the risks of selling property at such price levels?
- The most important risk is that these properties will ultimately remain unoccupied, with all that this entails for those involved in the property market. You do realize that the market is punishing, and it is something we saw happen in 2012-13 when several companies operating in the construction sector could not bear the financial burden of stagnation and collapsed. As a result, people lost their jobs, and the property sector went through a deep crisis. In order for the sector to recover, the plan to naturalize foreign investors was implemented, and we saw how it was closed down in a hurry due to the negative impact it had on the country's credibility. If we are somewhat strong in our positions, it is because we have experienced difficult situations and we know very well that there is more to come.
[This article was translated from its Greek original and edited for conciseness and coherence]
