The Cypriot real estate market experienced a 7% rise in property sales in February 2024, compared to the same period in 2023. Key cities Limassol, Larnaca, and Nicosia each recorded over 300 sales, indicating continued demand in urban centers.
However, the market presented a mixed picture across different regions. Sales in Larnaca surged by 36%, while Nicosia saw a 13% increase. Limassol recorded a modest 5% growth, whereas Famagusta and Paphos experienced declines of 25% and 10%, respectively.
Housing Affordability Concerns
Despite an overall positive trend in sales, there is growing concern that foreign buyers are driving up prices, making it increasingly difficult for young Cypriots to enter the property market. Cyprus is currently facing a housing crisis, with mortgage and rent payments exceeding 40% of household income. With average home prices at €270,000—seven times the median household income of €38,000— affordability is a significant issue.
The high cost of housing has resulted in delayed family planning, university rejections, and job refusals, as individuals struggle to find affordable housing options.
Proposed Solutions and Market Regulations
To address these challenges, the Cyprus Real Estate Agents Registration Council has proposed banning short-term rentals, particularly on platforms like Airbnb. Nearly one-third of Airbnb listings in Cyprus are unregistered, adding to market distortions. Additionally, the opposition party AKEL has proposed ending the 5% reduced VAT rate for foreign buyers, aiming to prioritize local middle-income families.
However, the Attorney General’s office recently rejected a proposal to limit short-term rentals, allowing investors to continue acquiring multiple properties without the same regulatory constraints as hotels.
Meanwhile, Cyprus is investing in affordable housing projects to support young buyers, though concerns remain that these units might still be purchased by foreign investors, reducing accessibility for local residents.
Market Segment Analysis
Domestic Market Trends
Sales within the domestic market saw a 6% year-on-year increase in February.
- Larnaca led the growth with a 64% increase, followed by Nicosia (+8%) and Limassol (+1%).
- Paphos (-30%) and Famagusta (-32%) experienced notable declines.
- Overall, domestic sales for January–February 2024 were up 15%, with Larnaca (+43%), Limassol (+23%), and Nicosia (+13%) seeing the highest growth rates.
Foreign Buyers’ Influence
Property sales to foreign buyers (both EU and non-EU) increased 8% in February compared to the previous year.
- EU citizens accounted for the most significant growth, with sales up 31%, reflecting strong demand from European investors.
- Nicosia (+41%), Paphos (+32%), Limassol (+30%), Famagusta (+29%), and Larnaca (+25%) all saw higher EU buyer activity.
- Over the first two months of 2024, sales to EU citizens increased 37%, with Famagusta (+105%) and Paphos (+52%) leading the surge.
- Non-EU buyers showed a more cautious approach, with sales falling by 1% in February.
- While Nicosia (+36%), Larnaca (+2%), and Limassol (+1%) recorded slight growth, Famagusta (-57%) and Paphos (-2%) saw declines.
- Over January–February 2024, sales to non-EU buyers remained mostly unchanged, with increases in Larnaca (+13%), Limassol (+8%), and Nicosia (+2%), but declines in Famagusta (-38%) and Paphos (-9%).
District Preferences Among Buyers
The appeal of different regions varies among buyer demographics:
- Paphos remains a top destination for non-EU buyers, particularly those purchasing holiday homes.
- Nicosia is the least preferred district for international investors, with local demand being the primary driver of sales.
Conclusion
While the Cyprus property market continues to grow, affordability challenges persist. The rising influence of foreign buyers, combined with limited regulatory intervention, raises concerns about long-term accessibility for local residents. The success of ongoing affordable housing initiatives and potential regulatory changes will determine whether the market remains sustainable for both domestic and international buyers in the future.
Source: Cyprus Property News