Market Overview
In the wake of elevated mortgage rates, the Cypriot real estate market has seen a shift towards stabilization following a period of robust growth in both sales and rental prices, fueled by strong demand and substantial foreign investment.
This comprehensive report from the Global Property Guide delves into the key aspects of Cyprus’s housing market, examining recent developments and long-term trends.
Housing Market Snapshot
According to the Central Bank of Cyprus, the residential property price index in 2023 experienced year-on-year growth, accelerating from 7.66% (1.76% inflation-adjusted) in Q1 to 8.28% (6.54% inflation-adjusted) in Q4. This marks the first annual increase in inflation-adjusted prices since 2021.
Price Dynamics by Property Type
When analyzed by property type, apartments showed a higher growth rate of 12.7% year-on-year (10.9% inflation-adjusted), compared to houses which grew at 5.7% year-on-year (4.0% inflation-adjusted) by Q4 2023.
Regional Price Development
Regional price changes were uneven, with the highest year-on-year growth of 11.0% (9.2% inflation-adjusted) recorded in the Larnaca district. Limassol followed with 10.7% (8.9% inflation-adjusted), and Famagusta with 9.5% (7.8% inflation-adjusted). The slowest growth was in the capital district of Nicosia at 5.1% year-on-year (3.4% inflation-adjusted).
Residential Property Price Index Dynamics in Key Submarkets
| Region | Index (Q1 2010 = 100) | QoQ Q4 2023 vs Q3 2023 | QoQ Q4 2023 vs Q3 2023 Inflation-adjusted | YoY Q4 2023 vs Q4 2022 | YoY Q4 2023 vs Q4 2022 Inflation-adjusted |
|---|---|---|---|---|---|
| Nicosia | 85.1 | 1.5% | 3.6% | 5.1% | 3.4% |
| Famagusta | 84.4 | 2.1% | 4.2% | 9.5% | 7.8% |
| Larnaca | 85.9 | 2.5% | 4.6% | 11.0% | 9.2% |
| Limassol | 108.1 | 3.0% | 5.1% | 10.7% | 8.9% |
| Paphos | 93.4 | 2.7% | 4.8% | 8.3% | 6.6% |
Market Influencers
Geopolitical turmoil, inflation, and high mortgage rates are the major factors currently impacting housing prices in Cyprus, as identified by the CEO of Ask Wire, a company specializing in real estate intelligence and analytics. “High mortgage rates are likely to persist, reducing local purchasing power and stabilizing market prices as demand adjusts. We expect growth in investment property prices to slow down in the second quarter of 2024 and beyond,” he stated.
Rental Market Trends
The rental market in Cyprus has shown signs of stabilization. Growth in rent rates eased to 9.26% year-on-year for apartments and 6.37% for houses, compared to higher averages in 2023. According to Global Property Guide’s research in June 2024, gross rental yields for apartments averaged 4.57%, down from 4.91% in July 2023.
Residential Sales Trends
After peaking in 2023, residential sales are showing signs of stabilization. The first five months of 2024 saw 6,231 property sales contracts, a marginal decrease of less than 1% compared to the same period in 2023. Domestic sales grew by 12.20%, while overseas sales declined by 16.5%, indicating uneven performance across districts, particularly in coastal areas like Paphos and Limassol, which are popular among overseas buyers.
Registered Contracts of Sales (Jan 2024 – May 2024)
| Region | Domestic | YoY Jan-May 2024 vs Jan-May 2023 | Overseas | YoY Jan-May 2024 vs Jan-May 2023 | Total | YoY Jan-May 2024 vs Jan-May 2023 |
|---|---|---|---|---|---|---|
| Nicosia | 1,179 | 24.6% | 235 | 48.7% | 1,414 | 21.9% |
| Famagusta | 134 | -25.6% | 137 | 11.4% | 271 | -11.8% |
| Larnaca | 703 | 12.1% | 599 | 5.8% | 1,302 | 8.4% |
| Limassol | 1,324 | 11.7% | 683 | -34.8% | 2,007 | -11.2% |
| Paphos | 441 | 2.1% | 796 | -22.6% | 1,237 | -18.0% |
Supply Highlights
According to CYSTAT, 7,170 residential building permits were authorized in Cyprus in 2023, reflecting a 5.7% year-on-year decrease. However, the number of dwellings authorized and the value of permits increased by 12.2% and 16.4%, respectively, indicating a shift towards larger projects with multiple units per development.
Residential Permits Authorized (Jan 2024 – Mar 2024)
| Region | No. of Residential Permits | YoY Jan-Mar 2024 vs Jan-Mar 2023 | Value of Residential Permits (€000’s) | YoY Jan-Mar 2024 vs Jan-Mar 2023 | No. of Dwelling Units | YoY Jan-Mar 2024 vs Jan-Mar 2023 |
|---|---|---|---|---|---|---|
| Nicosia | 708 | 7.27% | €266,651 | 15.37% | 1,043 | 20.86% |
| Famagusta | 118 | 55.26% | €35,016 | 117.40% | 96 | 152.63% |
| Larnaka | 368 | 28.67% | €149,136 | 44.06% | 657 | 39.49% |
| Limassol | 468 | -19.86% | €208,302 | -14.80% | 932 | 10.04% |
| Paphos | 214 | 1.90% | €71,141 | 43.28% | 196 | -3.45% |
Mortgage Market
In May 2024, the interest rate for new floating-rate loans and loans with an IRF of up to 1 year in Cyprus decreased by 0.17 percentage points from the previous quarter, as reported by the Central Bank of Cyprus (CBC). However, the annual percentage rate of charge, which measures the total cost of loans, rose by 0.03 percentage points, indicating that mortgage costs have yet to stabilize. At 5.15%, the annual percentage rate of charge on new housing loans in May 2024 was significantly higher than the eurozone average of 3.76%, as well as comparable 2023 and 2022 levels.
Interest Rates on New Housing Loans
| May 2024 | YoY | May 2023 | YoY | May 2022 | |
|---|---|---|---|---|---|
| Floating rate and IRF up to 1 year | 4.53% | ↑ | 3.85% | ↑ | 2.28% |
| Annual percentage rate of charge | 5.15% | ↑ | 4.36% | ↑ | 3.03% |
Note: The annual percentage rate of charge includes the total cost of the loan, including interest rate and other related charges.
Interest Rates on Outstanding Housing Loans by Original Maturity
| May 2024 | YoY | May 2023 | YoY | May 2022 | |
|---|---|---|---|---|---|
| Original maturity up to 1 year | 3.61% | ↑ | 2.72% | ↑ | 1.60% |
| Original maturity over 1 and up to 5 years | 3.90% | ↑ | 3.84% | ↑ | 1.66% |
| Original maturity of over 5 years | 4.64% | ↑ | 3.80% | ↑ | 2.06% |
Rental Market
According to the latest data from RICS, as of Q1 2024, average gross rental yields in Cyprus were recorded at 5.44% for apartments and 2.97% for houses. Both property types experienced a year-on-year increase compared to 2023, when yields were 5.38% and 2.86%, respectively. This dynamic is also supported by recent research from Global Property Guide, which in June 2024 registered the country´s average gross rental yield at 4.57%. In quarter-on-quarter terms, however, yields for both apartments and houses demonstrated marginal decreases of 0.04 percentage points and 0.02 percentage points respectively, indicating the market entering a stabilization phase, as reported by RICS.
Ask Wire Rental Index in Key Submarkets as of Q1 2024, Q1 2018 = 100
| Region | Apartments Rental Index | YoY Q1 2024 vs Q1 2023 | Houses Rental Index | YoY Q1 2024 vs Q1 2023 |
|---|---|---|---|---|
| Nicosia | 150.39 | 6.3% | 143.41 | 3.2% |
| Famagusta | 145.25 | 4.8% | 122.14 | 7.4% |
| Larnaca | 150.43 | 7.6% | 182.11 | 5.3% |
| Limassol | 196.76 | 23.0% | 178.84 | 12.8% |
| Paphos | 153.64 | 5.3% | 128.90 | 3.2% |
Socio-Economic Context
In 2023, real GDP growth in Cyprus moderated at 2.5%. According to the European Commission analysis, robust domestic demand, particularly consumption, was driven by rising employment and disposable incomes amid declining inflation. Net exports, on the other hand, significantly hindered growth, primarily due to a substantial decline in exports of financial and professional services caused by geopolitical tensions, while imports surged with increased consumption and investment. A further upward trajectory is expected on the back of persistently strong domestic demand and improving exports with the real GDP growth forecasted at 2.8% in 2024 and 2.9% in 2025.
Economic Growth and Inflation
Nationwide inflation, measured by the Consumer Price Index (CPI), continues to stabilize, reaching 2.9% year-on-year in June 2024, slightly up from 2.7% the previous month, but significantly below the year-end peak of 8.1% in 2022, according to CYSTAT data. The European Commission projects further deceleration, with headline inflation reaching 2.4% in 2024 and 2.1% in 2025.
Current Account Deficit
In 2023, Cyprus´s current account deficit reached an unprecedented 12.1% of GDP. Although declines are forecasted, the indicator is still expected to stay elevated at 11.2% in 2024 and 10.8% in 2025. The widening of the trade deficit is primarily due to Cyprus´s reliance on energy imports and the import of consumption and investment goods, particularly amid high energy prices. Additional influence factors include the repatriation of profits by foreign-owned companies, including banks, and increasing primary income outflows.
Government Budget and Debt
The general government surplus rose to 3.1% of GDP, up from 2.7% in 2022. This increase was driven by double-digit revenue growth from tax-rich sources such as consumption and rising wages, which outpaced robust expenditure growth driven by higher public wages and social spending. However, measures to mitigate the impact of high energy prices slightly reduced the budget balance, with a net budgetary cost of about 0.4% of GDP. The European Commission forecasts the budget to maintain a surplus of 2.9% of GDP in 2024 remaining steady in 2025. The general government debt-to-GDP ratio is expected to drop significantly over the forecast horizon from 77.3% in 2023 to 65.4% in 2025 mainly thanks to primary surpluses combined with continued strong nominal GDP growth.
Labor Market
Cyprus´s labor market is strong, serving as one of the key factors supporting the ongoing macroeconomic growth. In the first quarter of 2024, the unemployment rate in the country was registered at 6.0%, according to the Labor Force Survey figures provided by CYSTAT, down from 6.8% in the corresponding period of 2023. European Commission forecasts the unemployment rate to continue a downward trajectory reaching 5.6% in 2024 and 5.4% in 2025, expecting the labor force to be reinforced by foreign workers as domestic labor shortages persist.
Resilience and Future Outlook
Overall, the Cypriot economy has shown resilience, and the outlook remains favorable. In its Mission Concluding Statement, the IMF summarized: “Supported by robust policies, Cyprus recovered swiftly from the pandemic, and has proved broadly resilient to multiple adverse shocks. Growth is above most European peers, and inflation is close to 2 percent. Fiscal performance continues to be strong, significantly reducing public debt”. Moving forward, maintaining fiscal discipline with sustained surpluses, resisting wage indexation, ensuring financial sector vigilance, strengthening the judiciary and education systems, and implementing vital climate policies are considered key priorities.
