The rise recorded in the housing market in Cyprus during the first quarter of 2023 was significant, as prices continued to increase, especially in apartments, mainly due to higher demand. According to data published on Tuesday, the House Price Index of the Central Bank of Cyprus showed a substantial acceleration compared to previous quarters, while the sales document records of the Department of Land and Surveys reflected an increase in demand on an annual basis. The largest annual increase during this period came from foreign buyers, who accounted for about half of all buyers in 2022 and the first quarter of 2023.
At the same time, the rate of increase in construction costs seems to be stabilizing compared to the period of 2021-2022 when high growth rates were recorded.
The annual increase in the House Price Index in the provinces of Limassol and Larnaca is accelerating, while in the Paphos province, despite a slower pace, the housing price increase remains high.
Up until the first quarter of 2023, the increase in the basic interest rates of the European Central Bank and the resulting decrease in demand for housing loans did not significantly affect the domestic property demand, as it continued to rise.
The House Price Index (houses and apartments) in the first quarter of 2023 recorded a quarterly increase of 2.1% compared to 1.6% in the previous quarter. This rise in the House Price Index is attributed to a 2.3% increase in apartment prices and a 1.7% increase in house prices compared to the previous quarter.
On an annual basis, there is also an increase in housing prices by 7.7% in the first quarter of 2023, compared to 6.6% in the fourth quarter of 2022. Apartment prices during the examined period recorded an annual increase of 8.4%, and house prices increased by 6.6%.
While the increases in housing prices in 2022 seemed to be mainly driven by increases in construction costs, the first quarter of 2023 shows that the increases are primarily supported by increased demand, according to data from the Department of Land and Surveys. This demand for properties appears to be driven by structural factors, meaning that buyers are not purchasing properties for speculation but rather as primary residences or for development purposes.
Moreover, despite the increase in housing loan interest rates due to the European Central Bank's monetary policy, the overall demand for properties does not seem to have been significantly affected up until the first quarter of 2023.
Larger increases in Limassol, Larnaca, and Paphos
In the first quarter of 2023, housing prices every quarter increased in all provinces. Specifically, there was a 1.3% increase in Nicosia, a 2.9% increase in Limassol, a 2.6% increase in Larnaca, a 0.3% increase in Paphos, and a 2.3% increase in Famagusta.
Regarding the annual changes in housing price indices per province, there was an increase in all provinces for the sixth consecutive quarter. Specifically, in Nicosia, housing prices increased by 4.3%, in Limassol by 10.6%, in Larnaca by 7.7%, in Paphos by 6.8%, and in Famagusta by 4%.
The relatively high rate of housing price increases in the provinces of Limassol, Larnaca, and Paphos may be related to the demand from foreigners due to the "headquartering policy." In contrast, in the Famagusta province, the rate of housing price increases has slowed down in the last two quarters.
Every quarter, housing prices recorded increases in all provinces except Paphos. Specifically, there was a 1.3% increase in Nicosia, a 2.8% increase in Limassol, a 2.2% increase in Larnaca, a 2.9% increase in Famagusta, and a 1.1% decrease in Paphos. On an annual basis, housing prices increased in all provinces. Specifically, housing prices in Nicosia, Limassol, Larnaca, Famagusta, and Paphos increased by 4.2%, 9.4%, 5.8%, 5.7%, and 5% respectively.
Apartment prices every quarter increased in all provinces. Specifically, there was a 1.4% increase in Nicosia, a 2.4% increase in Limassol, a 3.5% increase in Larnaca, a 4.3% increase in Paphos, and a 1.2% increase in Famagusta. On an annual basis, apartment prices continued to rise in all provinces for the seventh consecutive quarter. Specifically, in the first quarter of 2023, apartment prices increased by 4.4% in Nicosia, 10.4% in Limassol, 12.3% in Larnaca, 10.3% in Paphos, and 2.4% in Famagusta, compared to the same period in 2022.
There was a 33.6% increase in properties sold to foreign buyers according to the most recent data from the Department of Land and Surveys. The number of sales documents continued to increase by 18.8% on an annual basis, reaching 3,574 sales documents compared to 3,009 in the same period last year. This reflects the increased demand for properties.
During the examined quarter, there was a 33.6% increase in properties sold to foreign buyers (1,706 compared to 1,277), mainly from non-EU countries. Additionally, the number of properties sold to domestic buyers increased by 7.9% on an annual basis (1,868 compared to 1,732).
This increase in sales to foreign buyers is mainly attributed to the "headquartering policy," which attracts foreign professionals from countries such as Russia, Israel, Ukraine, the United Kingdom, Lebanon, and Belarus.
The restrained supply of new properties is reflected in the construction production index (building category) of the Cyprus Statistical Service (CYSTAT). After six consecutive quarters of annual decreases, this index recorded an annual increase of 5.5% in the first quarter of 2023.
As for the number of residential buildings for which building permits were issued, indicating construction activity, there was a 6% annual decrease in the first quarter of 2023. This is the fifth consecutive quarter of decline in the number of residential buildings for which building permits are issued, indicating a restrained supply expected to continue in the future.