Construction costs and demand keep property prices high

Housing prices in Cyprus continued their upward trajectory in the fourth quarter of 2022, driven by both increased construction costs and rising demand, according to a report released this week by the Central Bank of Cyprus (CBC).

The Residential Property Price Index (RPPI) compiled by the CBC, which includes houses and apartments, recorded both quarterly and annual increases during the fourth quarter of 2022.

Additionally, there was an acceleration in annual price growth in the districts of Limassol, Paphos, and Larnaca, most likely due to the concentration of foreign demand in these areas.

Notably, house prices in Paphos saw a significant annual increase of 10.4 per cent, while apartment prices experienced substantial year-on-year growth in Limassol (9.3 per cent), Larnaca (9.4 per cent), and Paphos (8.6 per cent).

Specifically, during the fourth quarter of 2022, the RPPI (houses and apartments) registered a quarterly increase of 1.6 per cent compared to 2.1 per cent in the previous quarter.

The rise in the RPPI stemmed from a 2.1 per cent increase in apartment prices compared to the previous quarter and a 1.1 per cent increase in house prices during the same period.

On an annual basis, there was also an increase in housing prices of 6.6 per cent during the fourth quarter of 2022, compared to 6.3 per cent in the third quarter of the same year.

Moreover, apartment prices during the period under review recorded a year-on-year increase of 7.7 per cent, while house prices rose by 5.6 per cent.

“The ongoing increases in housing prices are primarily supported by the persistently rising construction costs, even though their rise is decelerating, along with an increase in demand in the real estate market,” the central bank said.

Furthermore, the CBC reported that increased demand in the real estate market during the final quarter of 2022 was also reflected in the sales document records of the Department of Land and Surveys (DLS), which continued their upward trend.

In fact, they approached levels seen in the second quarter of 2019, when they reached the highest level of the last decade.

Furthermore, the report stated that during the period under review, “construction activity remained at negative levels, possibly due to the continuing increase in construction costs.”

It also highlighted the fact that until the fourth quarter of 2022, “the increase in the ECB’s key interest rates and the resulting decrease in housing loan demand did not appear to have significantly affected the demand for properties”.

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Housing prices by district

According to the CBC, housing prices in the fourth quarter of 2022 experienced an increase on a quarterly basis in all districts except Famagusta.

Specifically, Nicosia recorded a marginal increase of 0.3 per cent, Limassol 2.5 per cent, Larnaca 2 per cent, and Paphos 2 per cent, while Famagusta saw a slight decrease of 0.8 per cent.

Regarding the annual changes in the housing price indices by district, there was an increase in all provinces, the central bank noted.

In particular, Nicosia experienced a 3.5 per cent increase in housing prices, Limassol 8.7 per cent, Larnaca 5.1 per cent, Paphos 9.8 per cent, and Famagusta 4.4 per cent.

On an annual basis, the rate of increase in housing prices in the districts of Limassol, Larnaca, and Paphos experienced an acceleration, which may be related to the demand generated by the country’s headquartering policy and all relevant incentives provided within its framework.

Conversely, the rate of increase in Nicosia and Famagusta experienced a slowdown.

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House and apartment prices

More specifically, on a quarterly basis, house prices recorded increases in all districts, as reported by the central bank.

In particular, in Nicosia, they increased by 0.3 per cent, in Limassol by 1.2 per cent, in Larnaca by 1.7 per cent, in Paphos by 2.2 per cent, and in Famagusta by a marginal 0.1 per cent.

On an annual basis, house prices also experienced an increase in all districts. Specifically, house prices in Nicosia, Limassol, Larnaca, Paphos, and Famagusta increased by 2.9 per cent, 7.1 per cent, 3.3 per cent, 10.4 per cent, and 4.2 per cent respectively.

Furthermore, apartment prices on a quarterly basis marked an increase in all districts except for Famagusta.

Specifically, in Nicosia, they increased by 0.2 per cent, in Limassol by 3.6 per cent, in Larnaca by 2.3 per cent, in Paphos by 1.4 per cent, while in Famagusta they decreased by 3.7 per cent.

On an annual basis, apartment prices recorded an increase in all districts for the sixth consecutive quarter.

Specifically, in the fourth quarter of 2022, compared to the corresponding quarter of 2021, prices increased by 4.3 per cent in Nicosia, 9.3 per cent in Limassol, 9.4 per cent in Larnaca, 8.6 per cent in Paphos, and 5.1 per cent in Famagusta.