Cyprus property price decreases may be short-lived, council president warns

The real estate market in Cyprus appears poised for a challenging year, marked by organic, market-driven price reductions, which may be offset by supply chain disruption, stemming from geopolitical conflicts, according to the president of the Cyprus Council for Registration of Real Estate Agents Marinos Kyneyirou.

In a recently published piece of analysis, Kyneyirou said that 2023 was expected to be difficult due to the many issues that persisted from 2022.

“We can still see that the lingering effects of the 2020-2021 pandemic and the eruption of the conflict in Ukraine in February 2022 continue to cast a shadow on the market,” he said.

Moreover, the persistently high inflation triggered significant interest rate hikes by the European Central Bank (ECB) throughout 2023.

This resulted in a continuous rise in borrowing costs until October when interest rate increases halted.

At the same, he added, construction material costs remained elevated compared to pre-pandemic levels.

“Despite these challenging conditions, the real estate sector demonstrated resilience, showcasing its ability to thrive in adversity,” Kineyirou said, citing data from the Department of Lands and Surveys, which is regularly processed and presented quarterly by the Council for Registration of Real Estate Agents.

According to the data, the first nine months of 2023 witnessed a total of 8,681 property transfers, amounting to €1.4 billion, and 9,374 sale agreements with a total value of €3.3 billion.

However, in the fourth and final quarter of 2023, the council expects to see figures that reflect a market downturn.

“In our view, the primary factor influencing demand, both domestically and from international buyers, is the soaring property prices,” he said.

“It is essential to note that property prices for sale or rent are not determined by real estate agents but rather by property owners,” he added.

Moreover, he said that recent Eurostat findings reflect a decreasing percentage of Cypriots who are able to acquire their own homes.

“Many individuals are returning to their parental homes due to challenges in purchasing or renting,” Kineyirou stated.

“The increased cost of living, high property prices, and elevated loan costs often lead banks to deem young couples seeking loans for property acquisition as financially unsustainable,” he added.

Furthermore, Kineyirou reiterated that “we had previously warned both the current and past government that as housing prices rise, more people will turn to renting, exacerbating the issue”.

He explained that this problem is becoming worse due to a new trend where property owners opt for short-term leases.

“Unfortunately, we are currently witnessing what we had predicted, with rental prices reaching levels requiring even a monthly wage for accommodation,” he said.

Meanwhile, the council president explained that under normal circumstances, the council expects that in 2024, market forces will come into play, leading to some reductions in residential and apartment sale prices, primarily through offers and discounts.

“Already, there have been some movements by property owners in this direction, attempting to stimulate buyer interest and sell their properties,” he said.

However, he warned that uncertainties loom over 2024, given the ongoing conflict in Ukraine and the recent developments in Gaza.

He noted that concerns are growing further as reports and statements leave the possibility of the war expanding to Lebanon.

At the same time, he continued, the supply chain is being affected by the Houthi attacks in Yemen, disrupting the smooth operation of the Suez Canal.

“It is evident that the repercussions of the dramatic reduction in ship transit through the Suez Canal will soon be felt in the Cypriot economy, particularly in the real estate market,” Kineyirou said.

“A potential increase in the prices of raw materials and construction supplies could likely keep property prices, especially for newly built properties, at elevated levels,” he concluded.