2022 is a difficult year for the Cyprus property market, especially for the primary development sector.
First, the coronavirus, and then the closure of the passport program became severe trials for many residential and commercial projects and developers. What will happen next with the market of new buildings? Let's try to answer in this article.
The year 2020 met Cyprus with the coronavirus pandemic and, as a consequence, lockdowns. In the spring months of 2020, important sectors of the economy — tourism and real estate — were frozen. Of course, this was a temporary event, and the second half of 2020, as well as the whole of 2021, were marked by positive dynamics. Residents of Cyprus and foreigners who could not purchase a primary or secondary because of the first lockdowns did so after the restrictions were lifted.
It seemed that the major crisis was already over, the real estate market would quickly meet the pre-pandemic figures. Moreover, the coronavirus was supposed to increase the demand for Cypriot real estate (especially primary) among third-country citizens who, by purchasing a second home (or office) in Cyprus, could obtain a European passport and the opportunity to travel to Europe when EU borders were closed for non-Europeans. And indeed, during the first lockdowns, the percentage of elite sales among foreigners who managed to cross the border and come to the island for incredible money was high.
However, Cyprus could not use such an advantage of the coronavirus for a long time. In the fall of 2020, the passport program was closed after a big scandal. Now an investor cannot obtain citizenship for the purchase of real estate in Cyprus.
The cancellation of the program has become a real blow for some developers aimed at foreigners-rich people, and the whole sector of luxury real estate. Some developers had to close or delay some of the new projects, others decided to reduce the cost of their projects by reducing the size of apartments and villas or reducing the cost of materials. Some developers experienced a real shock and found themselves on the verge of ruin.
But not the whole market was focused on the program of "golden" passports. Housing of low and medium price categories has not been greatly affected by the investment scandal. Both Cypriots (+ Europeans) and citizens of third countries continued to buy real estate here. However, the market occured to be under new pressure by the end of 2021, now due to the long-lasting side effects of the coronavirus.
The lockdown led to the disruption of global supplies of construction materials, which dramatically increased their cost. New buildings have risen in price. The economic downturn of the first year of the coronacrisis (2020) also negatively affected demand.
Primary market potential
Any crisis ends with growth. The coronavirus crisis is also coming to its expected end. The economy of Cyprus and most of the important countries for Cyprus show positive dynamics. The black days are ending for the island's real estate market as well.
If we talk about the elite new property (worth more than a million euros), then, of course, the investor hype that was before the closure of the passport program is no longer expected.
Of course, the difficult events in some countries important for Cyprus: the war in Ukraine and the ongoing economic crisis in Lebanon — slightly increase the demand for luxury real estate (especially Limassol and Larnaca).
Who is interested in buying expensive real estate in Cyprus?
Cypriots — the domestic client is the main buyer of real estate in Nicosia, as well as significant for all other areas but Limassol. The closure of the passport program did not affect the interest of the domestic client in any way, but the coronacrisis in the medium term reduced the purchasing power of some Cypriots.
Europeans — The European buyer is not the most significant, but sensitive for coastal areas, as well as partly in Nicosia. As in the case of the Cypriots, the closure of investments could not affect them in any way, but the coronacrisis had a negative impact.
Third—country nationals - this is where the closure of the passport program dramatically reduced the significant influx of customers. Of course, the conflict in Ukraine has revived the demand for luxury real estate among Russians, Ukrainians and Belarusians, but problems with transactions from these countries have complicated the purchase of real estate in the first months. Russian-speaking clients make up a significant part of the demand for luxury real estate in Limassol and other coastal areas.
Rich citizens of Israel and Arab countries (Larnaca, Nicosia and to a lesser extent Limassol) are also interested in Cyprus. The passport program hit them hard, but not so significantly.
Meanwhile, the possibilities of medium-priced real estate (300 thousand euros - 1 million) are growing significantly and promise only to grow in the coming years. There are many prerequisites for this.
The demand for such real estate among the citizens of Cyprus remains high and will continue to grow. The post-crisis reset of the Cypriot economy and government programs contribute to the constant need for new housing. The market of Nicosia is very stable — the urban agglomeration, 'satellite villages' and villages towards Larnaca-Limassol (for example, Dhali), as well as those areas of Limassol, Larnaca and Famagusta that have convenient and quick access to the capital (Livadia, Dhekelia, Ayia Napa, Protaras).
The market of Europeans and Britons is also expected to grow steadily. Britain, after two long years of coronavirus restrictions, has once again become the main supplier of tourists who filled the resorts of Paphos and Famagusta. After Brexit, Cypriot real estate has become a second home for some Britons and an opportunity to stay in Cyprus, although in fact the legalization of British citizens on the island has been greatly simplified.
A certain part of British citizens associated with Cyprus either have Cypriot passports, or came to the island before the "divorce" of Britain and Europe, so they can freely rent out the purchased property. This also includes citizens of all EU countries (as well as Switzerland and Norway). The number of tourists-Swiss, Greeks, Germans, Scandinavians, Poles returns to the pre-crisis level, and with them the interest in tourist real estate (more often Famagusta, Paphos and Larnaca).
In the segment of medium-priced housing among residents of third countries, the main buyers are Russian-speaking customers, as well as citizens of Israel and the Arab countries. The unfavorable economic and political situation in some of the above countries, as well as the stable growth of Israel and the Arabian Peninsula, increase the demand for real estate in Cyprus. The main legal engine here is the program for obtaining permanent residence for new housing in 300+ thousand euros. In fact, the program is not new at all, but it was the Cypriot authorities who began to promote it after the closure of the passport scheme.
The development of the new construction industry is also influenced by the appearance of foreign developers. The demand for housing among clients who speak Russian and Arabic has brought foreign players to the market (such as Prime Property, CDA Group, Admare, "Arabs" are represented by Elite Properties, Plus Properties, Naddaf Construction).
The market of new buildings of a small price category (up to 300 thousand euros) is mainly represented by Cypriot consumers in all areas of the island. The offer here is also huge — apartments and houses in areas convenient for Cypriots (but not always for foreigners) are built by both large companies (Africanos) and hundreds of small construction firms (Bana Constructions). Often these are houses in the off-plan stage (construction begins after signing the sale agreement).
For citizens of third countries, this market is not a key one — the purchase of cheap housing does not give them the opportunity to obtain Cypriot documents, so many foreign buyers with this budget switch their eyes to the secondary market.
Cyprus' primary real estate market has a future!
The crisis and the closure of the passport program have had a strong impact on the primary real estate sector, but the demand for it, although greatly reduced, will remain stable in the long term. In turn, the need for new housing of the average price category (300 thousand euros -1 million) will only grow in the near future. The demand for inexpensive real estate will remain the same, but mainly among Cypriots.
Interested in buying a property in Cyprus? Welcome to the DOM website! Here you will find options for houses and apartments in Limassol, Paphos, Larnaca and Famagusta, as well as get the help of experienced specialists.
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