The leading on-line resource for home buyers & real estate investors -

5th July 2022
Cyprus Property News logo
HomeProperty NewsWealth gap reshaping property sector

Wealth gap reshaping property sector

The Cyprus property sector is reinvented by a growing wealth disparity, creating a wider gap among potential buyers for homes and apartments. The trend is set to continue as the economy hits the buffers.

Real estate agents report a high number of Cypriots with cash in the market to buy houses and flats, boosting residential property sales.

The property market is experiencing a mini-boom as Cypriots rush to buy property before an increase in building costs takes its toll on the market and insecurity from the Ukraine war sets in.

According to data released by the Land Registry Office, the first five months of 2022 saw the highest number of sales documents submitted since 2008.

Sales documents submitted from January to May were 5,090, compared to 3,577 for the same period last year, recording an increase of 42%.

Compared to the same period in pre-coronavirus 2019, there was a 5% increase.

In comments to the Financial Mirror, Eleni Averkiou, property consultant for Danos/BNPRE Group, noted that while the sector can feel somewhat relieved, this could be a temporary state as the war in Ukraine continues to push up the cost of construction.

“One must be concerned over the hiking demand for rentals, an indication that many young couples and many families cannot afford to enter the property market at the moment,” said Averkiou.

The property consultant said rising demand for rental properties has pushed up rent prices.

“Although we cannot quantify the increase in demand, we can say from experience that we are witnessing an unprecedented increase in demand for rental housing units.”

She noted the trend is for families looking for smaller and cheaper housing, with the majority opting for one-bedroom and two-bedroom flats.

“On the one hand, the cost of living is pushing households to tighten their belts, and on the other, they can’t get a local bank to give them a loan to get their life started.”

Averkiou added some couples who have decided to weather the crisis, staying at rentals for the first years of their family journey.

The average rent for a one-bedroom flat in Cyprus is €570, €700 for a two-bedroom, and €900 for a three-bedroom flat. Prices vary according to the district.

She said that rents are equal to monthly instalments for the mortgage needed to purchase a flat; however, buyers must put down a 20% deposit.

“With prices of new houses and flats being pushed up by soaring building costs, couples need around €40,000 to €50,000 upfront.”

Loan squeeze

Cyprus Property Owners Association chair George Mouskides said he had not recorded an increase in demand for rentals attributed to people not being able to buy homes.

“Of course, costs of building materials have pushed up the prices of new houses and apartments by at least 20%, but the increase will not put off people in the market with cash.”

Mouskides argued people’s finances were in better shape as job promotions in the financial and public sector that were put on ice have been rebooted, while the civil service lifted a freeze on hirings.

“This can help some couples overcome the hiking cost of building and cost of living for the time being.

“As time moves on, and the conflict in Ukraine is not resolved, hiking costs will definitely take a toll on the industry, as more people will be turning to old houses and flats rather than new projects.”

Mouskides believes that if building prices continue to rise, coupled with record-breaking inflation and increased interest rates, it could trigger a “massive turn” towards rentals.

Economist and former MP Anna Theologou argued that banks are turning away credible couples looking for a mortgage.

According to the Central Bank, the total lending granted by Cyprus banks in April was €193.6 million from €378 million the previous month, recording a decrease of 49%.

Annually, new loans recorded a decrease of 9.1%. Consumer loans in April were €11.4 million compared to €12.3 million in March, while housing loans fell to €64.8 million from €195.2 million.

Theologou cannot understand why banks are hesitant to grant housing loans to young couples who are not in debt and can prove that they can cover instalments as they pay their rents regularly.

“A mortgage for a €150,000 – €200,000 with a payment period of 25 years would mean a couple needs to meet a monthly instalment of €630 to €700. This is what they are paying in rent anyway.”

The economist argued that banks are creating a loss of future wealth.

“It is no secret that Cyprus’ growth in recent years has been backed by business loans taken out by people wanting to start their own business with their home as collateral.

“This will no longer be an option for young people who may want to venture into the business world.

“What is more, people in the past have also been taking out student loans to put their children through university. They will not have that option now.

“Banks are depriving Cyprus’ future generation of potential wealth.

“Lending should not be seen as handing out assets, but as an investment in future generations”.

RELATED ARTICLES

Top Stories

Sign up to receive our free newsletter

We handle your data responsibly, find more about our privacy policy

Elsewhere in Cyprus Property News

EUR - Euro Member Countries
GBP
1.1611
RUB
0.0168
CNY
0.1430
CHF
0.9978