Number of property sales to foreigners not from the EU
In January-July 2020 the number of transactions with foreign investors decreased by 46% compared to the same period last year. At the same time, the total number of purchase and sale contracts, which are concluded not with Cypriot citizens, decreased by 43% over the same period. This suggests that closed borders have become an equal obstacle for EU residents and foreign investors from other regions.
Why do we primarily look at the demand from foreign investors? Many of them participate in the Cyprus citizenship program for investments, which stimulates the acquisition of expensive real estate. Thus, transactions with foreign investors prevail in the money market.
Factors affecting foreign investment
The decline in demand from foreign investors is due to the crisis and closed borders. Buyers could not visit the country to select suitable facilities.
Another significant factor is the recent changes in the Cyprus citizenship programme for investment. Many investors who were planning to participate in the program took a wait-and-see attitude while the amendments were being discussed. Now the changes are accepted. We expect that the interest in the program will recover.
In addition, analysis of sales data suggests that it is the best time for investment in real estate in Cyprus.
Impact of the crisis: data for May-July
The crisis has a negative impact on demand for real estate, but the decline from region to region is uneven. We have placed the development areas in the table depending on the interest of investors. In our experience, the area of Paphos is in the highest demand.
by 31%
Please note that the number of real estate transactions in Limassol and Nicosia has decreased drastically. A fall in demand leads to a fall in prices. If you plan to invest in real estate in Cyprus, pay attention to Limassol and Nicosia.
These areas traditionally attract many investors from Russia, and large Russian-speaking diasporas are concentrated there. Against the backdrop of falling prices, this is an additional plus for real estate investors who intend to participate in the Cyprus citizenship program for investment.
Dynamics of demand* for Cyprus property in crisis
| Region | February-April | May-June | Dynamics |
|---|---|---|---|
| Paphos | 139 | 176 | +26,6% |
| Larnaca | 91 | 100 | +10% |
| Limassol | 152 | 105 | -31% |
| Nicosia | 23 | 16 | -30% |
| Famagusta | 31 | 23 | -26% |
*Transactions with buyers who were not EU citizens at the time the contract was concluded.
July indicators: trend reversal?
The figures of July in the antiphase with those of the last 3 months – we can see a strong decline in demand in Paphos. Perhaps, the official data reflects the emerging trend. In this case, August and September this year is a favorable period for real estate investment in the region, whose prices are usually the highest in Cyprus.
Dynamics of real estate demand in Cyprus for foreigners
| Region | June | July | Dynamics |
|---|---|---|---|
| Paphos | 65 | 43 | -34% |
| Larnaca | 32 | 40 | +25% |
| Limassol | 37 | 43 | +16% |
| Nicosia | 4 | 5 | +25% |
| Famagusta | 4 | 3 | -25% |
*Transactions with buyers who were not EU citizens at the time the contract was concluded.
Positive dynamics in Larnaca, Limassol, Nicosia may mean the beginning of demand recovery from foreign investors.
The market has come close to a minimum
The overall decline in sales in Cyprus in July was only 8%. This is an indicator that takes into account the total number of transactions with real estate – in the domestic market, with EU citizens, with foreign investors. If you compare the figures with 2019, the market is at least approaching stabilization.
Sales dynamics as compared to 2019
| Month | Dynamics |
|---|---|
| April 2020 | -80% |
| May 2020 | -71% |
| June 2020 | -10% |
| July 2020 | -8% |
*Compared to the same period in 2019.
Thus, even with all types of transactions, August and September this year is the best time to buy property in Cyprus.
Prognosis: recession in construction will lead to higher prices
In response to falling demand, activity in the construction industry has declined. In April 2020, there were 62.5% fewer construction permits issued compared to April 2019. In total, 1721 permits were issued in Cyprus between January and April 2020. In comparison, for the same period in 2019, the number of permits issued was 2111.
It is important that the total value of the objects has increased by 53%, but the area has decreased by 26.5%. Therefore, it is very likely that the post-crisis recovery in demand will lead to a jump in property prices in Cyprus. This is another serious reason to invest in real estate in Cyprus right now.
Earlier we said that the Cyprus Property Price Index began to decline at the end of 2019 – the fall in prices for the fourth quarter was 4.8% compared to the same period in 2018.
Cyprus experts suggested that the government introduce measures that would help to overcome the crisis more quickly. Among them – VAT exemption and reduction of commissions on bank transfers. If the measures are taken, it will make real estate investments even more profitable.
