Despite significant year-on-year increases in property prices and rents across Cyprus, the local housing market is experiencing a downturn for the first time in four years.
Recent sales figures for the last quarter indicate a stabilisation, and in some cases a decline, in the value of Cypriot houses and apartments.
In particular, in Limassol, the island's most expensive city, house prices fell by 0.5 per cent in the second quarter compared with the first quarter of 2002. This is a significant achievement given that flat prices rose by 2 per cent in January-March 2024 and by 8 per cent in October-December 2023.
Moreover, flat prices across Cyprus have stabilised over the last two quarters. It should be noted that since the second quarter of 2021, when many COVID restrictions were lifted and the market started to recover, flat prices in Cyprus have been rising steadily. At the same time, quarterly growth was between 1% and 5% until the end of last year. However, over the last three quarters this growth has been less than 1% and there was little or no change in the second quarter of 2024, indicating a significant cooling of the market.
Interestingly, the downward price trend in Limassol is not limited to apartments. The value of houses also fell by just under half a percentage point in the second quarter of 2024 compared to the first quarter. Over the past few years, house prices in Limassol have fluctuated, with quarterly increases ranging from minimal to 5%, peaking in mid-2023. The recent decline suggests that the market may be entering a period of more subdued growth.
Larnaca, for its part, has been the only city in Cyprus to record stable house price growth over the past three years. At the same time, quarterly growth has ranged between 1% and 3%. In the second quarter of 2024, house prices in this coastal city rose by 0.5% compared to the previous quarter. In all other cities of the island nation, prices remained stable, also indicating a slowdown in price growth in the market.
The rental market in Cyprus is also losing activity.
However, the picture is mixed. Overall, rental prices rose by 1% in the second quarter of 2024 compared to the previous quarter, mainly due to a significant increase in rental values in Paphos and Limassol. In Paphos, rents rose by 5% and in Limassol by 3%. In contrast, rents in other areas, including the capital Nicosia, remained stable. In Nicosia, rents were relatively stable, rising by 3% in the first quarter of 2024 and remaining unchanged in the second quarter. In Limassol, however, rents continue to rise. Apartment rents in Limassol have been rising since 2021. According to the latest figures, they increased by 2 per cent in the second quarter of 2024. Meanwhile, rents across the island have remained stable, indicating a divergence in demand dynamics between different types of accommodation.
Despite the decline in property prices, the rental market remains under pressure, especially in Limassol. According to Danos International Property Consultants and Valuers, renting a one-bedroom apartment in Limassol costs at least €850 per month, while a two-bedroom apartment costs at least €1,300. Renting a two-bedroom apartment in the region costs around €1,700 per month.
In Nicosia, rents for a one-bedroom apartment range from €550 to €650, while a two-bedroom apartment costs at least €750 per month. However, prices vary considerably depending on location, with rents higher in areas on the outskirts of the city, such as Engomi.
Larnaca and Paphos offer more affordable rental options, but the growing interest of foreign investors and high-tech companies in these coastal cities could lead to rising rents in the near future.
On a year-on-year basis, apartment prices in Cyprus rose by 3.5 per cent in the second quarter of 2024, while house prices remained stable. This reflects robust demand for housing in Cyprus, driven in part by foreign buyers. In 2023 alone, foreign buyers purchased 6,900 properties, a 16 per cent increase from the 5,928 properties purchased in 2022.
Luxury residential property is expected to continue to drive the market in 2024, particularly in Limassol. This Cypriot city is likely to remain the dominant destination for buying luxury apartments in high-rise towers by the sea, while Nicosia is expected to maintain a more modest but stable market, attracting students, business owners and civil servants. As supply increases and EU interest rates fall, local buyers may find more opportunities to invest in residential property.