REAL ESTATE MARKET KICK-STARTING ONCE AGAIN
2020 was a tough year for the real estate sector, with a fall in the number of sales as well as their prices. One could argue that this was expected as the pandemic kicked in and the lockdowns created a huge uncertainty for the economic future and transactions.
During 2021 the real estate sector seems to be making a comeback both in the region of prices as well as transactions. More specifically, the first nine months of 2021 show a 29% increase in sales compared to those of 2020. Compared to 2019, the best year following the economic crisis of 2013, 2021 is down by 9% in sales volume. We expect that by the end of the current year, 2021 will even or surpass 2019.
Doing the math by district, we see Nicosia having the biggest increase, 37%, compared to 2020. Limassol is a close second with 36% but still leading in actual numbers. Trailing behind are: Larnaca with 26%, Famagusta at 23% and Paphos with a 10% increase.
Sales to foreign nationals reached 47% in 2018 and 43% in 2019, as a percentage of the sales island-wide. In 2020 the ratio decreased to 37%. During the first 8 months of 2021 sales to foreigners dropped further to 33% of the total sales. In absolute numbers, we expect that by year’s end sales to foreigners will reach 3000, which was what we had in 2020. The fall in sales to foreigners in 2020 and 2021 was expected after the abolition of the naturalization program (passports) and the difficulties in traveling and doing business during the pandemic.
We think that the incentives offered to foreign companies to establish offices and station employees on the island will, in the medium term, greatly benefit the economy, to an even bigger extend that the passport program, but this begs for an article on its own.
Based on data from the Cyprus Stat Office the prices of flats and houses dropped 5.8% during the year that ended the first quarter of 2021 (year-on-year). However, an increase is being recorded for the second quarter and it is expected to continue as materials prices increase and demand drive prices upward.
Increased demand, especially for new housing units (flats and houses), is explained by:
· For quite a number of years few new housing units were constructed
· There are now incentives to own your first or main residence, (VAT, interest rates, etc.)
· Easy access to loans despite the stringent bureaucratic requirements
· Deposits carry very low or even negative interest while rents enjoy a healthy return
The increasing number of new building units and the expected small reduction in materials prices as the global economy is picking up activity again, might hold down the expected price rise at lower levels.
Written by: George Mouskides
Director FOX Smart Estate Agency
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