Vlad Yazykov
Reading time
6 min
27 September 2021

How Has COVID-19 Affected Cyprus Property Market?

Lockdown in Wuhan was the first of many antiviral measures to be introduced over the next two years, these measures included the closure of borders between countries.

Some of the restrictions have not yet been lifted, in some countries, they have been tightened, in most countries, they have been paused. The story is not over. We can only hope that the main surprises are behind us.

But let's go back to the end of 2019. The Cyprus property market was developing rapidly, attracting more and more interest from foreign investors. In 2018, the Cyprus economy grew by 5.5%. In 2019, the growth was 3.2%. The growing demand for Cypriot real estate has led to a significant increase in its value. According to the statistics of the Central Bank of Cyprus, in 2018 the Cyprus real estate has risen in price by 8.7%.

The main clouds seen by real estate investors and developers were the increasing pressure of the EU and US institutions on the Cyprus investment program. However, the most scandalous cases were still ahead.

In 2020, the volume of concluded transactions in the real estate market fell to its lowest level since 2016 - 7968 (in 2019 it was 10366), recording an annual decline of 23.1%.

The drop in sales was mainly due to the coronavirus and the closure of the Citizenship by Investment program, which brought €8 billion to the real estate market. In November, the government canceled the program because of the Al Jazeera controversial documentary, which opened corruption schemes in the Golden Passport program.

November 1, 2020 was the official end date of the program.

Then the Ministry of Internal Affairs reported that 1,417 applications are under consideration - about half of them from investors and their family members. Applications were processed only at the end of September this year. Almost fifteen hundred potential large investors were a good engine for the island's real estate market, however, the Law Office of the Republic of Cyprus and the EU have not yet said their word.

Developers had received upfront payments from these investors, which was almost as good as money in the bank, but their applications must have been approved in order to complete purchases and register with the Land Registry. Much more encouraging was the claim that Cyprus had learned from mistakes. The government was developing a new scheme aimed at attracting foreign investors, but with guarantees that businessmen have real interests in Cyprus, in addition to obtaining the coveted passport.

However, according to experts, despite the cancellation of the investment program, the outbreak of the coronavirus became a real blow to the industry, which affected both the demand from foreign investors and the domestic market.

A significant decrease in tourist flow, which still has not yet reached 2019 figures, meant that many properties bought by investors for renting out had returned to the market, with lower prices and lower interest in new properties.

The same goes for apartments in Paphos, where 30% of homes are owned by British expats, who usually rent out their homes during the hot summer months.

A number of these houses are now up for sale as their owners either cannot fly to Cyprus so easily due to COVID-19, or have difficulty renting them out and are selling them to get anything.

The surplus of secondary housing affects the pace of construction. In Limassol, over the past two years, many construction projects have been put on hold as developers fear demand will dry up.

In Cyprus, the situation at the beginning of the year was even worse than in the European Union. From January to March, the value of residential property in Cyprus fell 5.8% compared to the same period in 2020. At the same time, prices rose in the rest of the EU. The average growth rate in the union was 6.1% of the cost of housing in the region.

The statistics on housing prices are provided by Eurostat, which takes into account the cost of housing under sales and purchase agreements concluded in the EU for the selected period. Cyprus turned out to be the only country in the European Union where house prices fell both on an annualized basis and compared to the quarters of 2020.

What now?

According to data published by the Department of Lands and Surveys, in August 2021, 724 real estate purchase and sale agreements were concluded in Cyprus. This is 29% more than in the same month last year (561).

Annual numbers. In the first eight months of 2021, 6,089 real estate purchase and sale agreements were concluded, while in the same period of 2019 - 7,044. It can be seen that purchasing activity has not yet recovered to the pre-pandemic level. However, sales this year exceeded 2018 (6,019).

The lack of deals with overseas buyers is slowing the recovery of the Cyprus property market. Thus, real estate sales in the domestic market during the first eight months of 2021 (4089) are at the highest level in more than 10 years. However, sales to foreigners over the same period (2000) have not yet reached the pre-pandemic levels (2884).

Why? Because:

  • The pandemic makes it difficult for foreigners to visit the island.
  • The Citizenship by Investment Scheme has been canceled.
  • The Cyprus authorities have decided to impose restrictions and bureaucratic obstacles for Britons wishing to buy property in Cyprus after Brexit. The British have long been the main foreign buyers in Cyprus.

Local sales. In August 2021, home sales of real estate were up 32% year-on-year, thanks to the government subsidized interest rate scheme and low interest rates.

Sales to foreigners. The number of transactions with foreign buyers in August increased by 24% compared to the same month last year. But for the reasons outlined above, it will take a long time for sales to recover to pre-pandemic levels.

At the same time, sales to EU citizens in August rose by 60% on an annualized basis, while sales to third-country nationals (including Russians) fell by 1% on an annualized basis.

However, experts note that these data are ambiguous, since banks are now selling confiscated real estate. For example, according to the Bank of Cyprus report for the first half of the year, its Real Estate Management Unit (REMU) sold 387 properties with a contract value of €85 million during the first six months of 2021. During the same period, REMU acquired real estate worth €21 million through debt-for-assets swaps and confiscation.

However, there are other markers that show that the island's property market was recovering rapidly.

Building permits issued in the first half of 2021 marked a significant recovery from the 2020 Covid crash, exceeding 2019 pre-pandemic activity, according to the Cyprus Statistical Office.

In the six months to June, 3,990 building permits were issued (3,153 in the same period last year or up 26.5%).

The total value of these permits increased by 20.5% to 1.34 billion euros (from 1.1 billion euros in the first half of 2020), and the total area increased by 31% to 1.23 million square meters.

Building permits issued in the first half of 2021 even surpassed pre-COVID levels, showing an increase of 17.6% over the first half of 2019. In June, the number of building permits issued was 833. The total value of these permits reached 270.4 million euros, and the total area was 263,700 square meters.

Interested in housing in Cyprus? Visit the DOM Real Estate website. The portal presents the largest database of real estate in the country - from residential to commercial. Choose and contact professionals who will help you make the right choice!

Read more:

  • TOP 5 areas of Limassol for real estate investment in 2021 (link)
  • Where to live in Limassol? Coastline vs mountains (link)
  • Permanent residence permit in Cyprus (link)
  • Investment in real estate in Cyprus (link)
  • TOP 6 apartments in new buildings with breathtaking views in Cyprus (link)
  • Limassol District Beaches (with Photos) (link)
  • Rules for inspecting an apartment / house you want to rent in Cyprus (link)
Source: DOM
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