The end of 2021 saw Europe’s and Cyprus’ economies gradually recovering from the two-year rollercoaster ride of lockdowns, the stock market at record highs, and inflation increasing.
One year later, the disruptions in the supply chain are less severe (e.g. the global container freight index is down 74% from $9,304 to $2,404), the stock market is down (e.g. the S&P 500 is down 19.5% from 4,750 to 3,800), and inflation appears to have peaked at circa 8-9%.
The war in Ukraine and the related geopolitical changes, the EU’s quick transition away from Russia as its primary energy supplier, and the rise in interest rates have all resulted in (and are still resulting in) a significant repricing of risk across asset classes, particularly those that are highly leveraged (such as real estate).
This repricing will continue in 2023, especially as other investment opportunities increasingly appear to be more appealing.
Our analysis will be split into two parts: establishing an evaluation framework and then using it to analyse Cyprus.
Higher disposable income, population expansion, more lenient lending requirements, and lower interest rates all serve to increase home values.
Similar to residential real estate, the price of commercial property tends to rise with GDP expansion and fall when interest rates and returns on other investments are greater.
International investors have an effect on the dynamics of property prices in both the residential and commercial real estate sectors.
With the above in mind, let’s look ahead at each of these drivers for 2023.
Disposable income is likely to be lower due to inflation an