While uncertainties remain for 2021, the Cyprus property market will continue to show its strength.
With at least two viable vaccines, low mortgage rates, tight supply and supportive government initiatives; the housing market will remain stable in 2021.
Property sales in 2020 fell by 23% compared to 2019; while almost all of the year of 2020 was experiencing lockdowns, semi-lockdowns, travelling restrictions and huge uncertainty. Despite this environment, sales in 2020 were above 2016 by nearly 13% while they decline just 9% from 2017.
In contrast with the widespread belief that market and rental values will collapse in 2020, prices have instead hold quite well (RICS Cyprus & Central Bank of Cyprus Residential Indices). At a European level, according to Eurostat, in the second quarter of 2020 house prices rose by 5% in the euro zone area (and 5.2% in the EU area) compared to the second quarter of 2019.
Assuming we manage the current infections well, and on the back of historically low interest rates, abolishment of travel restrictions and government stimulus packages, it’s looking more and more likely that demand will keep being strong.
It is worth to highlight that the propensity of households to save has reached unprecedented levels in response to COVID-19. According to Eurostat, in 2020 the household saving rate in the euro area was the highest observed since the beginning of the time series in 1999. This is explained by a sharp decrease of the household’s consumption.
Real estate supply in 2020 is lower compared to 2019. The uncertainty associated with the pandemic has stalled new construction while property-owners pulled back considerably as they anticipate a more favourable sale price if they wait. This limitation of the supply is more likely to continue in 2021.
This combination of relatively strong demand and low supply, will keep the Cyprus real estate market at least stable in 2021.
However, there are some key things to watch that could potentially be signs of trouble. If unemployment stays elevated, interest rates unexpectedly increase and further economic stimulus is slow to come, it could hurt demand for property as well. And if COVID-19 vaccinations are unexpectedly delayed or become problematic it will be devastating to the anticipated normalization of 2021.
With so much uncertainty affecting employment and business, many have speculated whether we will be hit with a property market crash this year. To quell any concerns, the real estate market in 2021 will look a lot more normal than in 2020 and any recession is highly unlikely to happen in 2021. While we are facing another spike in COVID-19 cases, the most negative impact we are likely to see is a short-term decline during the first quarter of 2021 in the number of sales and values; before re-entering a period of steady recovery through the remaining year.
About the author
Charalambos Pitros has a PhD in Real Estate Economics and is a Member of the Royal Institution of Chartered Surveyors (MRICS) and a Member of the European Real Estate Society. He is a Real Estate Investment Consultant and MRICS Valuer at Zyprus Property Group – Property Consultants & Estate Agents.