Cyprus’s residential property prices dropped by 4.9 percent
The Cyprus House Price Index is a quarterly index that tracks changes in average residential property prices. It includes all forms of new and existing residential homes. The residential property’s land component is included.
“The Department of Lands and Surveys, Ministry of Interior, provided the data for both indices and weights.” The information pertains to all places under the administration of the Republic of Cyprus’ government.
Property sales are steadily increasing
According to numbers provided by the Department of Lands and Surveys earlier today, the number of property transactions increased in September 2021 compared to the same month last year.
A total of 914 contracts for the sale of property were deposited at land registry offices around the Republic in September 2021, up 16 percent from the 768 contracts deposited in August 2020.
Since the COVID restrictions were eased earlier this year, sales have been improving, and the number of sales in September surpassed the pre-COVID number of sales in September 2019. (692).
However, the data will include an unknown number of ‘non-sale’ agreements between banks and failing borrowers, such as loan restructurings, recoveries, and debt-to-asset swaps, in an effort by the banks to lower their non-performing loan portfolios. Unfortunately, these numbers are not published separately by the Department of Lands and Surveys.
The government’s interest rate subsidy program, which will last through the end of 2021, has boosted sales. In February, the maximum loan amount for home acquisitions was increased from €300,000 to €400,000, with a 1.5 percent interest rate subsidy for a four-year term.
Banks expect net demand for all sorts of loans from enterprises and families to increase during the third quarter of the year, according to the Cyprus Central Bank’s Bank Lending Survey, which was released earlier today.
The Department of Lands and Surveys has not yet released its study of the domestic and international sales numbers.
The real estate prognosis is bleak, but Nicosia defies the trend.
Homeowners were stranded at home during global lockdowns and semi-lockdowns, unable to go on vacations or meet social obligations. With more time and money on their hands, it seemed inevitable that home remodeling activities would skyrocket (renovations of some rooms, extensions of current ones etc.).
At the same time, the lockdowns produce a delay in the material’s manufacture. This resulted in a supply-demand imbalance that persists to some extent today.
Finally, a combination of cheap mortgage rates and the trend of working remotely prompted some apartment owners to purchase a home, resulting in increased desire for more room.
Plan for infrastructure investment and electric vehicles
Governments are investing more money in infrastructure projects all across the world (mostly USA and China). This transition is thought to be the safest and quickest approach to create a large number of jobs while also providing a greater fiscal multiplier on a country’s GDP.
As we look ahead, infrastructure projects are consuming a lot of materials, which will result in a significant increase in all building materials.
Furthermore, the increased demand for automobiles, particularly electric vehicles, is creating an increase in the use of steel, aluminum, and particularly copper, which is used in the building sector as pipes, plumbing, wiring, and heating and cooling systems.
As an importing country, recent transportation issues such as capacity constraints, container shortages (container crisis), the rise of electronic commerce, increased demand for transportation space, and port labor shortages have resulted in higher importing costs, which are then passed on to consumers.
What’s next in terms of construction costs?
The rapid rise in building costs has a negative impact on buyer affordability, while it has a negative impact on developers’ company because their estimations may be completely inaccurate once the project begins or during the development phase.
While there is little room to change pricing for current contracts, new project costs are passed on. As a result, rising construction costs are driving a slowdown in off-plan new house sales, while raising demand and prices for resale and key ready properties.
Unfortunately, the increased construction costs come at an inopportune time, as a robust housing supply is the only way to alleviate the current housing scarcity.
In terms of future building costs, while demand is projected to stay up for some time, the important determinant will be whether and how quickly production and transportation will recover to full capacity.
In this regard, based on current market expectations, we believe that building costs will remain high for another 1-2 years before returning to pre-pandemic levels by 2023. Construction expenses will have moderated to a more regular increasing rate of 3%–5% per year by that time.