After a highly successful year for the home construction industry, real estate specialists see property sales continuing their upward trend reaching ‘normal levels’ for conditions of a healthy market without the risk of a new bubble.
Last year saw sales more than double since 2013, the year Cyprus suffered meltdown from the global financial crisis.
According to Land Registry Department data, 9,242 sales were registered in 2018, while just 2,676 properties were sold in 2013. The upward trend in sales has been building up since 2014 when property sales had picked up for the first time since 2010.
Compared to the previous year, 2018 saw 508 more properties being sold, while during 2017, 2,361 more properties were sold compared to 2016.
Commenting on what lays ahead for the sector in 2019, Chairman of the Cyprus Property Owners Association, George Mouskides told the Financial Mirror that he expects sales to increase by another 5% to 10% reaching what he called a healthy growth (yoy) for a real estate market.
He expects sales to stabilise over the coming years with the sector staying away from risks of a bubble being created.
The property market in 2018 saw a vigorous growth of 6% and experts predict the value of property will follow the same healthy growth pattern.
“Although property value is on the rise, I expect prices to be held down by the increase of property on the market with new projects being built and repossessed properties returning to the market in an orderly manner,” said Mouskides.
Analyzing the prospects of the sector, he said that the driving force behind the growth in real estate will continue to be foreign investors, particularly those interested in the Investment for Citizenship scheme, “although we expect the interest of foreigners to wind down, especially after the pressure exercised by institutions like the European Commission”.
It is worth noting that 50% of the properties sold last year were purchased by foreigners, who mainly chose properties located in Limassol.
Out of the 9,242 properties sold, 4,421 were sold to foreigners. Of these, 1,428 come from European Union countries and 2,993 from third countries, with Limassol and Paphos being their cities of choice.
Last year, Limassol saw 3,411 real estate sales throughout 2018. Followed by Paphos where 2,242 sales were recorded, an increase of 5% compared to 2017.
The real estate expert added that interest from locals for property was also on the rise evident through the high number of sales recorded in the capital, Nicosia.
“The fact that Nicosia has recorded a high number of sales in 2018 (1,606) and is taking the lead in building permits (39%) leaving Limassol behind with 29% is a clear indication that locals have returned to the market and the sector is becoming more diversified.”
Mouskides found the increase in demand by Cypriots to buy a house is encouraging and he found that house prices are recording “a healthy rise”.
Meanwhile, Larnaca is not far behind with a total of 1,345 houses and flats being sold in 2018.
Mouskides said government plans to give incentives to developers in the framework of its “affordable housing” scheme to be encouraging for the future of the sector.
“By increasing the building coefficient in return for developers selling or renting out flats to vulnerable fellow citizens will strengthen the construction industry on the one hand, and on the other, it will help to keep prices and rents at healthy levels, as it will increase the availability of housing units.”
“Of course, the future is not a bed of roses. We need to be careful not to overbuild if we do not want to relive the crisis of the previous years when construction companies and developers were declaring bankruptcy one after the other,” warned Mouskides.
The other danger lurking in the dark is the question of how will banks and other institutions decide to unload their real estate portfolios acquired through repossessions and debt-to-asset swaps.
“Currently banks are behaving in a sensible manner, careful not to cause any upset in the market, unloading their properties gradually”.
Mouskides added that he does not expect banks or institutions acquiring properties to unload them at once as that would bring down prices, which would backfire on their attempt to sell properties.
“However, as the number of institutions acquiring such portfolios is increasing, we do not know how they will react in an environment of intense competition.”
Office space demand
Adding to the broader brighter picture, another property specialist argued that the discovery of natural gas resources offshore Cyprus may also give impetus to the real estate sector bringing about a different cycle of development over the coming decades.
Panos Danos, CEO of Danos/ BNPPRE Group told the Financial Mirror that Cyprus has entered the gas era with his company predicting an even bigger growth of demand for real estate.
“The energy revolution is similar in opportunity and employment impact to the industrial revolution, but the major difference is that we now have a global economy instead of a national economy, and the magnitude of economic growth may be substantially greater than in the past,” said Danos.
He explained that just like the energy sector has created employment opportunities and the need for properties of various types all over the world, this is expected to happen in Cyprus.
“Energy employment has created major demand for office space, more efficient inventory control has caused demand for large warehouse space, land-based retail continues to grow as people have more money to spend and apartments are in large demand from young people, foreign investors and immigrants,” said Danos.
He expects demand for Grade A offices to take off, noting that this particular market was stable during 2018. Danos believes there will also be demand from local and international companies interested to expand their business and will be on the lookout for new office space.
Coupled with incentives for multi-story buildings, city centres especially are to see an increase in office developments.
“Nicosia, being the capital and financial centre of Cyprus, is home to the public sector and most of the large businesses operating on the island.
“Traditionally, office space in Cyprus is found in the old common type multi-storey buildings which are mainly located in the heart of the cities. However, in recent years a trend for decentralisation began to occur. In 2019 Grade A offices will be sought-after in the city centres but also in decentralised areas.”
Commenting on high residential rents, Danos said that he expects them to stabilise as the market and the Banks plan to increase their residential sales through auction procedures.
He also expects commercial rents to be pushed down due to the number of properties entering the market, especially with the new Nicosia mall and the expansion of existing shopping centres.
