In the latest edition of its Residential Property Price Index (RPPI), the Cyprus Central Bank reports that property prices continued to rise in the first quarter of 2022, driven mainly by the apartment market.
However, leading indicators have started to show the first signs of a moderation in activity.
The war in Ukraine has intensified inflationary pressures, with a significant impact on construction costs. An increase in the cost of borrowing, due to a possible rise in interest rates, may also have a negative effect on the real estate market says the Central Bank:
“The extent to which the demand in the real estate market will be affected, through a reduction in real disposable income of consumers, will depend on a number of factors including the duration of the war in Ukraine and sanctions, the course of the pandemic, etc.”
The RPPI reports that house prices rose 1.5% on an annual basis and by 0.7% on a quarterly basis while apartment prices rose 6.8% on an annual basis and by 1.7% on a quarterly basis.
On a quarterly basis, the RPPI registered the following changes in house and apartment prices:
- Nicosia: houses +0.1%, apartments +1.3%.
- Limassol: houses +0.6%, apartments +1.4%.
- Larnaca: houses -0.2%, apartments +0.8%.
- Paphos: houses +3.3%, apartments +2.7%.
- Famagusta: houses +2.1%, apartments +3.9%.
On an annual basis, the RPPI registered the following changes in house and apartment prices:
- Nicosia: houses -0.2%, apartments +3.4%.
- Limassol: houses +2.1%, apartments +6.9%.
- Larnaca: houses +1.3%, apartments +2.4%.
- Paphos: houses +4%, apartments +10.6%.
- Famagusta: houses +2.4%, apartments +8.3%.
The Central Bank notes that while domestic demand continues to underpin continued the growth in prices, the looming rise in demand from foreign investors and rising construction costs are also becoming factors that need to be considered.
The Government’s tax incentives to attract talent and promote headquartering in Cyprus are expected to further boost the demand for luxury homes for purchase and for rent by those who opt to relocate to Cyprus.