The Central Bank of Cyprus announced the need for constant monitoring of the real estate market, given the rise in prices for building materials.
In a recent financial bulletin, the country's main financial institution stressed that the continuing environment of low interest rates contributes to the growing demand from local buyers. At the same time, the fact that the lending criteria remain relatively strict indicates that, to a large extent, new mortgage lending will remain viable.
At the same time, according to the Central Bank, an important role in maintaining prices regardless of demand is played by the increase in the cost of building materials, which turned out to be especially noticeable in the third quarter of 2021.
'This fact makes it especially important to constantly monitor the real estate market, since it is not yet clear at what rate events will develop in the future, taking into account epidemiological events, as well as the intentions of banks to sell the collateral objects accumulated in their portfolios,' the Central Bank stressed.
Real estate prices in Cyprus have almost returned to pre-coronavirus indicators in the first half of 2021. The apartment segment recovered the fastest. On the other hand, the cost of commercial properties decreased during this period.
In particular, according to the Central Bank's Housing Price Index, during the first and second quarters of 2021, housing prices increased quarterly by 0.5% and 0.3%, respectively, prices for shops, warehouses and offices decreased in the first half of 2021 by 5.2%, 4.3% and 0.9%, respectively. In the third quarter of 2021, housing prices continued to rise. Basically, this trend was associated with the increased interest of investors in apartments.
The situation prevailing in the Cyprus real estate market in 2021 is a consequence of the successful implementation of the interest rate subsidy program, the reduction of interest rates in the domestic market, as well as the promotion of incentives for the placement of high-tech companies' headquarters on the island and the Cyprus permanent residence program through the purchase of real estate by foreign investors, the Central Bank said.
The Central Bank noted that the increase in housing prices corresponds to broader macroeconomic trends, such as GDP growth rates, which remain significant. More recent indicators, such as the real estate price expectations index for the next three months, published in the European Commission's Economic Survey, correspond to the upward trend in the sector.
According to the Central Bank, the growth in demand for real estate from local buyers, which continues to support the market, is to some extent reinforced by signs of stabilization of demand for real estate from foreign investors.
It is noteworthy that the largest number of transactions still falls on local residents. So over the year, the number of signed purchase and sale agreements with local buyers in Cyprus increased by 62.8%, and with foreign buyers - by 3.5%. 6656 were concluded with Cypriots in 2021 against 4983 in 2020 and 5885 in 2019, and with foreigners – 3691 against 2737 in 2020 and 4481 in 2019.
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