Continued Rise in Housing and Apartment Prices Despite Slowing Demand
The real estate market has seen a persistent surge in housing prices, with a notable increase in apartment prices during the fourth quarter of 2023. This trend comes from the latest report by the Central Bank of Cyprus, which highlights a complex landscape of fluctuating demand and evolving buyer preferences.
While the overall demand for properties showed a slight decline, as indicated by the department of lands and surveys, housing prices have not followed suit. A key factor in this dynamic is the rise in mortgage interest rates, which has tempered the demand for new housing loans. Nevertheless, foreign buyer interest and construction material costs have found a plateau, suggesting a more balanced trajectory for the Housing Price Index (HPI) in the near future.
Domestic buyers have been the main contributors to the increased property demand, even as foreign investments have dwindled. The total value and number of residential transactions, encompassing both houses and apartments, saw a marginal dip when compared to the previous year. This shift is partly due to higher mortgage rates and a reduction in approved housing loans.
A preference for smaller living spaces has been observed, with apartments being more sought after than houses. This trend is mirrored in the decreased average size of residential units for which building permits have been issued.
On the supply side, the market has struggled to keep up with the robust demand, which has been a significant driver of the uptick in the HPI. However, an increase in residential building permits suggests that supply might soon rise to meet demand, potentially easing upward pressure on prices.
The HPI itself saw a modest quarterly increase of 2.3 percent, with apartment prices outpacing house prices. Annually, housing prices climbed by 8.3 percent in the fourth quarter, with apartment prices soaring by 12.7 percent and house prices by 5.7 percent.
All provinces experienced higher housing prices for the fourth straight quarter. Nicosia, Limassol, Larnaca, Paphos, and Famagusta all saw increases, with Limassol leading at a 3 percent hike. The annual Property Price Indices (PPI) also reflected growth across all regions, with Larnaca topping the list with an 11 percent rise.
In conclusion, despite a complex interplay of factors affecting demand and supply, the Cypriot real estate market continues to experience significant growth in housing prices, particularly in the apartment sector.
