Opinion
By Pavlos Loizou*
Mid-2023 to 2024 Market Dynamics
The market underwent significant changes from mid-2023 onwards due to several global and regional factors. The absorption of pent-up demand following the COVID-19 lockdown, combined with the war and the migration of Russian speakers from Russia, Ukraine, Belraus and elsewhere, drove property prices across Cyprus and Greece to new highs. This period also highlighted the transformational impacts of the work-from-home trend, which reshaped office demand. Grade B and C offices faced declining interest, while Grade A spaces, logistics hubs (e-commerce-driven), and data centers (AI and cloud infrastructure) became increasingly sought after.
By 2024, demand in Cyprus and Greece had shifted. Key drivers included:
• Relocated Russian speakers committing to medium- to long-term stays by setting up companies, enrolling children in schools, and accessing local financing.
• High overseas interest in Greece, fueled by the Golden Visa program and geopolitical instability in Israel and Arab countries and the economic slowdown in China.
• Active participation by Israelis and Lebanese in both residential and commercial property investments.
At the same time, construction activity focused heavily on high-end projects, catering to investors interested in buy-to-let opportunities, short-term rentals (e.g., Airbnb), and real estate as a store of wealth. However, this financialization of real estate created affordability challenges, pushing middle-class households out of the market and raising rents.
Government Response
In both Cyprus and Greece, governments have started taking proactive measures, including:
1. Taxation Enforcement: Intensifying efforts to address tax evasion related to rental income and real estate transactions.
2. Social Housing Programs: Announcing grants and housing projects to improve accessibility for lower-income families and essential workers.
3. Energy Efficiency Initiatives: Aligning with EU commitments, governments are channeling grants to promote the refurbishment of older properties to improve energy efficiency.
Projections for 2025 and Beyond
1. Increase in High-End Projects
Expect a continued rise in high-end developments, driven by geopolitical demand and real estate's relative safety as an investment. However, oversupply risks loom as demand in this segment slows.
2. Shift in Office Space Demand
Grade B and C office spaces will see reduced interest as companies pivot to higher-spec Grade A spaces to meet employee and operational needs.
3. Greater Tax Scrutiny
Governments will crack down on tax evasion in the real estate sector, focusing on rental income and transactions.
4. Loan Servicer Pressures
Loan servicers will accelerate foreclosed property sales, capitalizing on price increases while returning funds to investors with maturing investments.
5. Expanding Social Programs
Increased emphasis will be placed on grants and affordable housing projects, providing opportunities for developers to cater to untapped segments.
Investment Strategies
1. Avoid Physical Real Estate for Small Allocations
If real estate forms less than 15% of your portfolio, consider ETFs for liquidity and diversification.
2. Focus on Control and Income Diversification
Acquire entire buildings or multiple residential units to maximize income streams. Favor city-center properties with steady demand over seasonal locations.
3. Leverage Refurbishment Opportunities
Seek undervalued second-hand properties and utilize government and EU grants for energy-efficient refurbishments. These upgrades add value and align with sustainability goals.
Closing Note
The real estate market in 2025 presents opportunities and challenges shaped by global trends and local policies. While real estate remains a preferred investment, focusing on sustainability, affordability, and practical use can unlock long-term value. Investors, bankers, and developers should approach this dynamic environment strategically, aligning with market needs and regulatory shifts.
Wishing you a healthy, happy, and prosperous 2025!
*Pavlos Loizou, CEO of Ask Wire, email: pavlos.loizou@ask-wire.com, T: +357 22 222550
