Local demand and higher costs push property prices up

The Cyprus property market prices recovered during the fourth quarter of the previous year, boosted by high local demand, according to the Central Bank of Cyprus’ residential property price index report released on Wednesday.

Additionally, rising construction costs were also deemed as a contributing factor to the rise in property prices.

The prices of houses and apartments rose by 1.3 per cent quarter-on-quarter during this time, nearly double the rate of 0.6 per cent observed during the third quarter of the same year.

Moreover, house and apartment prices rose by 2.6 per cent year-on-year during the fourth quarter, while the same figure stood at 1.2 per cent during the quarter before that.

“The increase in house prices comes mainly from the apartment market and to a lesser extent from the purchase of houses,” the Central Bank said in its report, noting that “the prices of apartments increased in all districts, both on a quarterly and annual basis”.

The report shows that house prices rose by 1 per cent year-on-year, while they increased by 0.7 per cent quarter-on-quarter.

Meanwhile, apartment prices increased by 6.3 per cent year-on-year and 1.3 per cent quarter-on-quarter.

“The real estate market in the fourth quarter of 2021 continued to rely mainly on domestic demand,” the Central Bank said.

Regarding the transactions completed during the previous year, these primarily concerned houses worth between €100,000 and €300,000, a segment of the market that mainly affects households, whose key purpose is the purchase of their first residence.

This price range also concerned domestic investors who sought to purchase properties in order to rent them out.

“In part, the increase in prices is also influenced by the continuous increase in construction costs,” the CBC report said, noting that there was a 17.3 per cent annual increase during the fourth quarter.

“As the majority of building materials are imported to Cyprus, the war in Ukraine and supply chain problems affecting international trade are expected to push construction costs even higher,” the Central Bank added, stressing that this issue may adversely affect demand in the future.

Regarding price changes according to each district, the report revealed that housing prices rose in all districts on a quarterly basis, except Larnaca, where a decrease of 0.3 per cent quarter-on-quarter was observed.

In Limassol, there was a quarterly increase of 1.9 per cent, followed by Nicosia with 1.2 per cent, Paphos with 0.6 per cent, and Famagusta with 2.7 per cent.

Regarding the annual changes in house prices according to each district, Nicosia house prices increased by 0.4 per cent, Limassol by 5 per cent, Larnaca by 2.1 per cent, Paphos by 2 per cent, and Famagusta by 1.4 per cent.

Furthermore, apartment prices rose in all districts on a quarterly basis, with Nicosia apartment prices increasing by 0.8 per cent, Limassol by 3.4 per cent, Larnaca by 0.3 per cent, Paphos by 4.5 per cent, and Famagusta by 3.4 per cent.

“The continuing rise in house prices is mainly due to domestic demand, which continues to be its largest share market,” the Central Bank said.

“To a lesser extent, it is also due in stabilising foreign demand investors, but also in rising construction costs,” the bank added.

The Central Bank also explained that as a result of external shocks, prices of construction materials have experienced significant increases.

“Property prices in Cyprus, in general, have not presented the large upward trends observed in other Eurozone countries in recent years,” the Central Bank concluded, noting, however, that Limassol has been an exception, with the luxury apartment segment affecting the market.