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25th May 2022
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HomeProperty ArticlesIs now the right time to sell your property?

Is now the right time to sell your property?

We frequently get asked this question around this time of year: Is now the right time to sell?

An optimal time to sell a property is when there is an increase in demand, record sale prices, interest rates are low and there is a shortage of properties available for sale on the market. Right now, we are experiencing all of those conditions. However, those conditions might be starting to change.

Here, are 3 aspects that sellers in 2022 should strongly consider.

Supply is lower than ever but this trend is temporary

This means buyers have less options to choose from, which creates more competition among them, resulting in a higher price for your home. Currently, the lack of supply has been a major driver of the stable price growth we’ve seen this year across the European and Cyprus real estate market. However, this trend won’t last for long for three reasons.

Firstly, When COVID-19 hit, the Cyprus government issued and extended a moratorium on foreclosures up to 31/10/2021. For this reason, very few foreclosures have been taken place, even less than usual. As this comes to an end, both covid and pre-covid pending foreclosures will take place. This will cause higher number of available properties for sale, lower asking prices – lower values, or at least a downwards pressure.

Secondly, the Cyprus average monthly earnings are expected to show muted increases whilst coincide with considerable higher cost of living. Apparently, a downwards pressure on the real purchasing power is anticipated in the coming years. By following this trend, property owners will have a higher motivation than otherwise to liquid their assets.

Thirdly, new construction has been declined and stalled in 2020 for many reasons. However, in 2021 and despite the unprecedented rise of construction materials it is expected that the permits for the number of new homes are about to increase by the end of the year, on a year-over-year basis, at around 10% – 15%. This means that by early to mid-2022 we are most likely going to experience an increase in the supply of new properties compared to the last year, at least.

Finally, baby boomers (ages of 58-75) is a big share of existing home owners. Hence, over this decade many of those will be passing away, moving with relatives or will actively need to downsize to other smaller and more suitable retirement homes. Progressively, the result will be more homes than usual will be entering the market each year. However, it is worth to highlight that this will create an over-demand for smaller properties as millennials opting for smaller homes.

Rising interest rates and worsening of affordability will push some buyers out of the market

The ultra-low interest rates make the cost of mortgage payment to ‘‘look’’ relatively low and the house prices to feel more affordable than otherwise. However, once the mortgage rates increase – and it’s not a matter of if, it’s a matter of when; the number of potential buyers will be reduced significantly since the cost of mortgage will increase progressively.

In the meantime, considering real estate prices are slow to react to new market conditions, the prices will continue to increase and thus cause a further deterioration on housing affordability. Nevertheless, the rising house prices require bigger down-payments; which means that even some of those who might be able to afford the mortgage payments are unable to qualify for a mortgage in the first place. This, in combination with the anticipated increase in the cost of borrowing (via the higher interest rates) will result to a considerable reduction of the mortgage applications.

Slowdown in property sales for 2022

The total number of property sales during 2019 was the highest on record since 2008 with sales rising in all districts. By the end of 2021, sales are expected to reach and nearly exceed the level of 10,000. This amount is nearly equivalent with the sales of 2019 which were 10,366 in total. It needs to be highlighted that the year of 2019 was the last active year for the citizenship by investment programme. Therefore, the number of sales at the moment are already quite high considering the adversity and restrictions of the global pandemic. Within 2022, the number of sales is expected to cool down; as affordability is worsening, interest rates are about to increase and supply is expected to grow.

The decision to sell a property is always personal and complicated. Coronavirus has only added another layer of complexity. Yet, for making better decisions one needs to always consider the prevailing and projected market conditions.

About the author

Charalambos Pitros holds a PhD in Real Estate Economics and is a Member of the Royal Institution of Chartered Surveyors (MRICS) and of the European Real Estate Society (ERES). He is a Lecturer in Real Estate at AUCY and a Chartered Surveyor Valuer at Zyprus Property Group – Property Valuers & Estate Agents.

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