Cyprus real estate agents call for government support

Kineyirou said that the state needs to act to address the challenges in the Cypriot real estate market

Council for Registration of Real Estate Agents president Marinos Kineyirou on Monday issued a statement warning of the challenges facing the real estate market in Cyprus, speaking of signs of fatigue emerging and a decrease in demand for housing loans.

According to Kineyirou, the root cause for these issues can be attributed to a combination of crises that have ravaged both the Cypriot and global economies over the past three years, resulting in weakened purchasing power for households.

He noted that without intervention from both government and the domestic financial sector, there is a risk of socio-economic problems arising, before noting that the council is willing to work with authorities to find solutions.

“Several months ago, we issued warnings about the many challenges facing the real estate market, which will fatally affect the performance of one of the Cypriot economy’s most critical sectors, which has a large contribution to the country’s GDP and the domestic labour market,” Kineyirou said.

“From the beginning of 2023 until today, and with the first quarter of the year behind us, we are now able to identify the first signs of fatigue, which have made their appearance felt in the real estate market,” he added.

Kineyirou said that based on the Central Bank of Cyprus’ bank lending survey, net demand for housing loans recorded a decrease in the final quarter of 2022.

Additionally, Cypriot banks participating in the survey stated that they expect that there would be a further decrease in the first quarter of 2023.

“This downward trend has its roots in the successive crises that have hit the Cypriot and global economy from 2020 onwards,” the council president said.

“The central banks’ battle with inflation continues, with successive interest rate hikes one after the other causing the cost of borrowing to skyrocket over the past 10 months,” he added.

At the same time, Kineyirou explained, soaring energy costs continue to be an issue, as do the prices of various consumer goods and services, with inflation remaining well above the 2 per cent target set by the European Central Bank (ECB).

Moreover, he noted that in terms of inflation, stakeholders shouldn’t overlook the fact that although its current level may appear to be lower than last year, it is actually higher when compared to 2020 and 2021.

“These factors, as we have warned in time, have weakened the purchasing power of households, rendering the acquisition of a residence, whether that is in the form of an apartment or house, severely weakened,” Kineyirou said.

“At the same time, whatever form of regulation the government eventually decides on pertaining to the burning issue of the reduced VAT rate of 5 per cent, will have an impact on the demand for real estate in the near future and therefore on the acquisition of a primary residence,” he added.

According to the council president, while the slight slowdown that is currently being observed may not have been a surprise, it still has an impact on the turnover of various businesses and the incomes of thousands of citizens who earn a living from the real estate sector.

What is more, he explained that if the government and banking institutions do not take this situation seriously, and if the slowdown is not addressed in a timely manner and allowed to grow, there is a risk of triggering a chain of socio-economic problems.

“From what we understand, the banks do not intend to lower lending costs,” he said.

Kineyirou noted that on the other hand, according to reports in the local media, banks appear willing to contribute to a social support scheme for people who want to buy a property and find it difficult due to the prevailing conditions.

“Let’s not forget that something similar happened during the pandemic when the government subsidized the interest rate on new mortgages,” he said.

“We believe that even in this period, targeted government intervention is necessary both to support citizens and to support the real estate sector,” he added.

“As the Cyprus Council for Registration of Real Estate Agents, we have stated many times that we are available for a discussion with the authorities in order to find solutions, as long as the situation is still manageable, as long as the fire can still be controlled,” he concluded.