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Cyprus real estate market report 2016

In its 2016 annual review Resolute Asset Management reports that the Cyprus real estate market is gradually becoming more active partly due to improving local and international economic conditions.

Cyprus real estate market report 2016IN ITS ANNUAL report Resolute Asset Management provides a review of the Cyprus economy & real estate market for 2016 and its prospects and expectations for the year ahead:

Transaction volume

The real estate market is gradually becoming more active partly due to improving local and international economic conditions. There is also an increasing appetite from foreigners to acquire real estate in Cyprus. This has been seen both in terms of sales involving the exchange of Title Deeds (+41%) and contracts of sale deposited at Land Registry offices (+43%).

Resolute notes that a spike in property sales occurred in December, possibly due to the Capital Gains Tax incentive that expired at the end of the year.

Overseas interest is still exclusively for residential properties in coastal regions. However, institutional investors are scarce and interested solely in finished income-producing assets (typically grade A properties) or prime parcels of land with potential for tourist and/or mixed-use developments.

Real estate prices

The six-year downward trend in property prices ended in 2016, with prices and rents increasing or stabilising across all asset classes. Property prices, rents and yields across Cyprus (Q2/2016):

Houses – Prices (+1.1%), Rents (+4.9%), Yields (2.0%).

Apartments – Prices (+0.5%), Rents (+4.9%), Yields (4.0%).

Retail – Prices (+0.8%), Rents (+0.5%), Yields (5.3%).

Warehouse – Prices (stable), Rents (-1.2%), Yields (4.3%).

Offices – Prices (+2.8%), Rents (+5.2%), Yields (4.5%).

(Percentage changes for prices are on a year-on-year basis. Yields are stated as at end Q2 2016.)

Restructuring transactions

Cyprus banks intensified the restructuring efforts to meet deleveraging objectives imposed by the European Central Bank. Part of this effort includes consensual debt-for-asset swaps by which the bank acquires the real estate collateral in exchange for partial or full debt forgiveness.

During the first nine months of 2016 there were 492 restructuring transactions, which represented 5.4% of the total number of transactions over the period.

42.3% of the debt-for-asset swaps took place in Limassol, while 79% of debt-for-asset swaps involved parcels of land.

The highest value transactions related to ‘other’ properties such as hotels, large residential complexes, incomplete structures, etc.

Property market expectations for 2017

Resolute Asset Management identifies a number of favourable and unfavourable factors, which it anticipates will affect the real estate market in the year ahead and concludes its report with its forecast for real estate capital values in 2017:

Real Estate Capital Values – 2017 Forecast

Housing PlotsStable
Commercial Plots+ 5%
OfficesClass A: +10%
Class B: +5%
ApartmentsCentre: +5%
Secondary locations: Stable
Touristic locations: +5%
ShopsCentre: +10%
Secondary locations: Stable
Touristic locations: +5%
Fields-10 (lack of demand)

Further reading

Resolute Asset Management Cyprus Economy & Real Estate Market – Annual Report 2016

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