PricewaterhouseCoopers (PwC) is an international network of companies offering consulting and auditing services.
The company has existed for over 160 years and is one of the so-called Big Four accounting firms. So, we think that if you are looking for weighty arguments for buying real estate on the island, these specialists are worth listening to.
Here are the main figures and theses of the annual report on the island's real estate sector.
It seemed that the pandemic and the cancellation of the Citizenship by Investment program would cause serious damage to the Cyprus real estate sector. The number of transactions will fall, prices will drop, construction will slow down. However, in 2021, surprises were waiting for potential buyers. DOM has repeatedly talked about the seemingly paradoxical flexibility of the Cypriot real estate sector. The industry has quietly gone through a difficult period. The strongest blows did not cause any serious damage to the market.
In their opening remarks, the CEO of PwC Cyprus also seems a little surprised by the data received.
The island's real estate and construction sector has maintained its position as one of the fastest growing sectors of the economy, while the sector's GDP increased by 4% over a 12-month period, they write.
At the same time, it is noted that the presented analysis is based on available market data for fiscal year 2021 using PwC's rich and deep market expertise and data analysis capabilities.
As for transactional activity, stable recovery markers were observed during 2021, while the total volume and cost increased by double digits compared to 2020. Real estate in the middle price segment (100-300 thousand euros), as well as land transactions were key growth factors.
At the same time Nicosia, apparently, is the engine of growth in the volume of transactions, mainly due to domestic demand, while real estate in Limassol continues to push prices up at the expense of foreign buyers of villas and apartments.
Impressive growth in the number of real estate transactions over the year
The year 2021 turned out to be surprisingly active for the Cyprus real estate market. The owners were replaced by 19.1 thousand objects. This is 32% more than in 2020, when hard lock-downs were introduced in the country one after another, and 11% higher than the result of 2019.
At the same time, the market volume (the total amount of all transactions) reached 3.8 billion euros. On the one hand, it's a lot. At least 26% more than a year earlier. On the other hand, Cyprus showed more impressive results: in the same year 2019, the market volume was 4.4 billion euros.
Also, compared to 2019, during 2021 there was a decrease in the value of transactions by 14%, which reflects a shift towards lower price segments of the market, due to strong domestic demand fueled by mortgages and state support.
Demand shift towards the middle price range
Some "deflation" of the market volume is easily explained. Due to the pandemic and the closure of the "golden passports" program in Cyprus, the structure of demand has changed.
28% of all housing transactions in 2021 were in the price range of 100-300 thousand euros. This segment became the most stable during the corona-crisis. Sales were active in all regions, most of the transactions were in the capital.
The main demand here is generated by locals who buy apartments and houses to move in. During 2021, a significant increase in new mortgage loans was recorded, mainly due to the state interest rate subsidy scheme, as well as a better-than-expected recovery in economic activity from the 2nd quarter of 2021.
In particular, the volume of new mortgage loans reached 1.3 billion euros during 2021, exceeding the levels that existed before the pandemic (2019: 972 million euros).
The elite segment, on the contrary, has sunk. In 2021, 139 real estate transactions worth from 1.5 billion euros were concluded in Cyprus, which is 23% less than a year earlier. Premium properties now account for 10% of the market volume. At the same time, the vast majority of buyers (78%) choose Limassol.
The largest growth in the sector of land transactions
There is a curious market structure in Cyprus. 65% of the total volume of transactions is occupied by housing. By the way, houses and apartments are equally in demand here (30% and 35%, respectively). And the second largest sector is land plots (25%), and not commercial real estate, which accounts for only 6% of the market volume.
Land in Cyprus is the fastest growing asset. Land transactions showed significant growth during 2021 reaching 7,300 transactions, which is 43% more compared to 2020 and 59% more compared to 2019 transactions. The total volume of land transactions reached 950 million euros during 2021, which is 58% more than in 2020 and 30% more than in 2019. In general, land transactions accounted for 25% of the total value of transactions in the sector during 2021.
67% of the total value of land transactions falls on land within residential development zones, while 15% is land within the agricultural zone.
Prices for Cypriot real estate increased by only 1% in a year
Another amazing figure. The huge increase in the number of transactions in Cyprus in 2021 did not provoke a comparable surge in real estate prices. PwC analysts record a rise of 1% on average in the country. In Limassol and Larnaca, the objects became more expensive a little faster — by 3%.
And this is despite the fact that building materials have increased in price by 11% over the year. It seems that the current prices for Cypriot apartments do not include a surcharge for global inflation, rising prices for building materials and energy, the destruction of supply chains and other factors that have already led to a rapid rise in the cost of housing in Europe. For comparison: real estate in France has risen in price by 7.5% over the year, in Greece – by 8%, Portugal – by 9.6%.
Interest in Cyprus real estate from foreigners is growing
Foreign demand remains important for Cyprus. During 2021, foreigners purchased 3.7 thousand properties here, which is 24% more than in 2020. And yet, before the pandemic, in 2019, the indicators were better — 4.5 thousand transactions.
Considering the monthly purchases of real estate by foreign buyers, it is obvious that during January — February 2021 (the quarantine months of 2021), the total number of real estate purchased by foreigners decreased significantly compared to the corresponding months of 2020 (the period before the pandemic). From March 2021 onwards, transactions with foreigners were accompanied by a growing trend demonstrating the recovery of the sector and the restoration of confidence in the foreign market.
Starting from August 2021, monthly transactions with foreigners seem to consistently exceed the levels recorded during the corresponding months of 2019, demonstrating the overall dynamics in the Cyprus real estate market.
About half of the transactions were carried out by buyers from non-EU countries (2019 – 66%, 2020 – 61%).
The most international regions were Paphos (31%) and Limassol (30%). The two coastal areas together account for almost two-thirds of foreign transactions on the island. There is a significant increase in demand for Larnaca, which foreign buyers previously paid little attention to.
In all areas of Cyprus during 2021, compared with 2020, an increase in the number of properties purchased by foreigners was recorded (on the basis of purchase and sale agreements, while in Nicosia there was the largest increase by 52%, followed by Larnaca (46%).
The purchase and sale agreements submitted by foreigners in Nicosia and Larnaca during 2021 exceeded the level of 2019. On the contrary, in the coastal areas of Limassol, Famagusta and Paphos, contracts for sale by foreigners still fall short of the level recorded in 2019, while in Paphos about 60% of the level observed in 2019 (a decrease of 39%).
Have you decided to buy an apartment or a house in Cyprus? Contact DOM! The website offers a huge selection of real estate —residential and commercial. Experienced agency specialists will be happy to help you make the right choice.
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