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House prices in Cyprus continued their upward trajectory in the fourth quarter of 2023, with apartment prices being the primary driving force, as per a report released by the Central Bank of Cyprus on Tuesday. The House Price Index (HPI) maintained its climb both annually and quarterly.
Despite a slight dip in demand, evidenced by comparative sales data from the CTI, house prices persisted in their upward trend during the fourth quarter of 2023. Factors influencing this trend include rising mortgage rates impacting new mortgage demand, a normalization of foreign buyer interest, an increase in residential property supply, and stabilized construction material prices. Consequently, the expectation is for the CPI to show more moderate increases in the near term.
Data from the Department of Lands and Surveys (DLS) revealed a slowdown in the year-on-year increase of total sales documents filed with District Offices, driven by decreased activity from foreign buyers. Additionally, fewer registrations of companies of foreign interests through the Company Facility Unit were recorded, aligning with the "Strategy for Attracting Companies to Operate and/or Expand their Activities in Cyprus."
On the demand side, the comparative sales data of the TCX indicated a slight decrease in the total value and number of residential property transactions in 2023 compared to the previous year. This decline is attributed to rising mortgage rates and reduced mortgage loan approvals. Notably, demand for apartments outpaced that for houses, reflecting a preference for smaller properties.
Supply-side constraints were noted, with limited supply compared to demand levels contributing to price increases. However, an increase in residential units for which building permits were issued in 2023, coupled with ongoing construction projects, is expected to alleviate supply pressures in the medium term.
The House Price Index saw a 2.3% increase in the fourth quarter of 2023, driven by a 1.8% rise in house prices and a 3.2% increase in apartment prices. Annually, house prices rose by 8.3%, while apartment prices surged by 12.7%.
Notably, significant quarterly price increases were observed in Limassol and Larnaca, with Nicosia, Paphos, and Famagusta also experiencing notable upticks. However, sales to foreign buyers decreased year-on-year, while domestic demand, particularly for buy-to-let investments, remained robust.
Residential property transactions continued to dominate the market, accounting for over 70% of the total transaction value, with apartments commanding higher values than houses. Land transactions, although comprising 16% of the total transaction value, ranked as the second-largest category.
Despite exceeding 2019 levels, total residential real estate transactions in 2023 saw a decrease compared to 2022, likely influenced by developments related to the headquartering policy. Specifically, fewer registrations of foreign interest companies were recorded in 2023 compared to the previous year.
[With information from CNA]
