Property sales surge to 15-year high due to foreign buyers

Residential property sales in Cyprus hit a 15-year record high in the second quarter of 2023, with significant increases in prices, according to data released by the Central Bank of Cyprus. In 2023Q2, the Residential Property Price Index (RPPI) registered a 1.5% increase, with a 2.1% increase in the previous quarter. This rise is attributed to a 0.7% increase in house prices and a 3.1% increase in apartment prices.

On an annual basis, residential prices increased by 7.4% in Q2 2023, compared to 7.7% in the previous quarter, with apartment prices increasing by 10.1% and houses by 5.6%. The demand for property in Cyprus continues to rise, with local buyers making up the majority of transactions.

Increased demand, coupled with limited new housing supply, appears to be the driving force behind the RPPI growth. Despite the European Central Bank's increase in key interest rates, which reduced mortgage loan demand, domestic demand for real estate remains on an upward trajectory. Construction costs have also stabilized in 2023.

The increase in foreign buyers is attributed to the "headquartering policy" and an increased number of students and other investors in the real estate market. Local demand seems to be driven by investments for the purpose of renting, known as "buy-to-let."

The Cyprus Property Sales Contracts saw a 26.5% year-on-year increase in the second quarter of 2023, marking a 15-year high. Specifically, the number of properties sold to foreign buyers increased by 38.5% year-on-year, while those sold to local buyers increased by 17.9% year-on-year.

However, following the ECB's rate increase, new loans for property purchases decreased by 2.9% year-on-year in Q2 2023. The mortgage interest rate also increased, averaging 4.28% during the same period.

Building permits for residential units showed a 13% decrease in the number of approvals, indicating a drop in construction activity.

The Cyprus property market continues to experience growth, driven by increased demand and limited supply.