COVID-19 has a significant impact on the development of the real estate sector in Cyprus

Карантин на Кипре серьёзно повлиял на развитие сектора недвижимости
16 November 2020 Liza Medvetskaya

The coronavirus's impact on the real estate sector during the lockdown period and the signs of recovery in the coming months are recorded by an in-depth market data survey conducted by Delfi Partners & Company.

According to the research, the total value of transfers and sales during the eight months of the year was reduced to €1.9 billion, reduced by 55% compared to the corresponding period of 2019, when it had reached €4.4 billion. 

The reduction has a corresponding effect on government coffers due to reduced VAT revenues, transfer fees, and capital gains tax, estimated at hundreds of millions. 

It is indicative that during the lockdown period, the total value of sales decreased by 66% in March, the market reached a nadir in April with a decrease of 91%, while in May the decline was 83%, compared to the corresponding months last year. Concerning the number of transactions, 844 transactions were made in March this year. Only 335 transactions were made in April, and it was the month in which the market was dramatically affected. Most of the transactions concerned residential properties. In May, a month in which travel restrictions began to be lifted and the public service began to adjust to the new data; there were 766 transactions with a total value of €140 million compared to 1500 transactions worth €356 million in February 2020.

According to Liana Polykarpou, Portfolio Manager of Delfi Partners & Company, commercial real estate purchase and sale in March-May 2020 were very limited, causing a particular sensation. "In April, only 13 transactions were identified, which demonstrates the general uncertainty and insecurity created by the coronavirus pandemic, especially among businesses."

The lockdown period (March-May) seems to have significantly affected the two largest provinces, Nicosia and Limassol. Concerning residential properties in the region of Limassol, the decrease reached -39% (89 million for March, April, and May compared to €147 million in January and February). In terms of commercial real estate transactions, for the period of comparison, both Nicosia and Limassol showed a decrease of €4.8 million and €5.2 million, respectively, with the percentages reaching -53% for Nicosia and -20% for Limassol. Respectively, in the land plots, the most significant decrease was presented in Nicosia (€65.2 million versus €23.4 million).

It should be noted that the results of the survey do not include transactions related to debt swaps through real estate recovery. This process has been successfully implemented in recent years by Loan Management Companies and Financial Institutions.

The months after the lockdown breathed new life into the real estate market. According to data compiled by Delfi Partners & Company, the decrease for June, July, and August was limited to 18% compared to the corresponding months of 2019.

However, despite the shock suffered by the market, the forces that determine it have not changed. Indicatively, residential real estate transactions still absorb more than 65% of the transactions' total market value. As Ms. Polykarpou explains, the lockdown and the new habits it brought may change the "wants." "Longer stays at home, the need to adjust to everyday life; the personal space and work from the living space may have differentiated the perception and preferences of potential property buyers. For example, a couple who until recently lived in an apartment, buying a house or a more spacious apartment ".  

A significantly positive sign found in the research of Delfi Partners is the impressive rise of the provinces of Nicosia and Limassol in residential real estate after the passage of the first wave of the pandemic. Specifically, comparing the sales before lockdown and after the lockdown (i.e., January-February 2020 with June-August 2020), an increase of 76% and 77%, respectively, is recorded. For the same period of comparison, Limassol's land market shows a rise of 26% and in Larnaca 65%. The specific data are confirmed in practice through the interest observed for the properties mentioned above in the particular provinces through Delfi Properties, the Group's real estate arm. This trend,

Of course, in such an unprecedented crisis, not everything could be rosy. Indicatively, in the period after the lockdown, there may be an increase in the number of transactions; however, there is still a decrease of 18% in terms of value. The cost of sales in the quarter June-August 2020 amounted to €760 million while in the corresponding period last year it had reached 925 million euros. 

Карантин на Кипре серьёзно повлиял на развитие сектора недвижимости

There is also a prolonged numbness concerning commercial properties in Cyprus, for which the demand reduction is universal, compared to the pre-lock down era. As Ms. Polykarpou notes, this trend may stem from the adaptation of companies and retail stores to modern online sales and employment methods, bypassing customers' and employees' physical presence and the general uncertainty that does not allow the implementation of large development investments.

In comparison, by province, the resilience of Larnaca is recorded. In the first eight months, it is the only province that shows a positive sign compared to the same period last year, which concerns the value of transactions for land plots. The increase is of the order of 7.5% (€56.4 million versus €52.5 million). Larnaca's province also shows the smallest decrease in commercial real estate, although the value of the transactions is too low to draw further conclusions. The tiniest drop is recorded in Nicosia (18%) and the second smallest in Larnaca (29%). 

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