The real estate market in Cyprus in 2023
In 2023, the real estate market in Cyprus demonstrated a positive trend. The cumulative growth in property values over the past 5 years amounted to 15%. Thanks to foreign demand and tax incentives, the first half of 2023 witnessed a rapid surge in both the volume and value of real estate compared to the preceding period in 2022. In percentage terms, the change in sales volume amounted to 8%.
Comparative analysis of the average cost of new real estate in Cyprus over the last 5 years
However, since the beginning of the third quarter of 2023, the real estate market experienced a slight decline in both the volume and value of properties compared to the same period last year. By the end of the nine months of 2023, the market decreased to 2.7 billion euros, or by 5.2% compared to the previous year.
The situation was influenced to some extent by recent legislative initiatives, including adjusted legislation regarding obtaining permanent residency for investments and new rules for applying reduced VAT rates for first-time real estate buyers. Nevertheless, experts anticipate that the demand for real estate will remain sufficiently high.
As for the premium real estate market, it was not very active throughout the year. Both segments - villas and apartments - showed a year-on-year decline.
Sales volume of premium real estate.
Sales volume of premium real estate by regions.
Most in-demand types of real estate in 2023 included:
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Residential: Buyers showed active interest primarily in the primary housing market, with stable demand for apartments, houses, and villas in various regions of the island.
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Touristic: Its attractiveness was linked to the growth of the tourism sector, which exhibited a 32% increase compared to the previous year. Focus remained on apartment-hotels, resorts, and hostels in resort regions of Cyprus.
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Commercial: There was active investment in office and retail properties, as well as public facilities, particularly medical and educational institutions, and industrial buildings.
Buyers predominantly favored the cities of Paphos, Limassol, Larnaca, Nicosia, and the free areas of Famagusta.
Prices for purchase and rent
Property prices per square meter steadily increased across all regions. For the first half of 2023:
Prices for both short-term and long-term rentals continued to rise, driven by an increase in tourist arrivals and growing demand from foreign guests. The most significant increases were seen in apartment and villa rentals in Larnaca, with a 38% and 31% rise, respectively, as well as apartment rentals in Paphos, which increased by 27%. Commercial property rental prices saw the highest increase in Nicosia (+16%) and Paphos (+12%).
Dynamics of the rental property price growth in Cyprus from 2019 to 2023.
Volume of sales of premium residential real estate by regions.
Limassol
Premium residential real estate experienced particularly high demand in Limassol, as evidenced by the high percentage of transactions involving houses and apartments. From the third quarter of 2022, the total value of residential real estate transactions amounted to 2.15 billion euros, of which 1.6 billion euros (76%) belonged to the premium segment of the market. It is worth noting that 1.27 billion euros were attributed to apartments, as they constitute the primary premium product in the area.
Sales volume and average prices.
In the third quarter of 2023, the median transaction price was 780,000 euros for premium-class houses and 320,000 euros for apartments. Compared to the third quarter of 2022, median prices for houses and apartments decreased by 8.2% and 8.6%, respectively.
Distribution of transactions by price ranges.
Pafos
High demand for premium residential real estate was particularly notable in Paphos, as evidenced by the high percentage of transactions involving houses and apartments compared to the total number of transactions in Cyprus. From the third quarter of 2022, the total value of residential real estate transactions amounted to 1.077 billion euros, with 505 million euros (47%) attributed to the premium segment of the market. It is worth noting that 328 million euros were attributed to houses, as they constitute the primary premium product in the area.
Sales volume and average prices.
In the third quarter of 2023, the median transaction price for premium-level houses was 870,000 euros, and for apartments, it was 310,000 euros. Compared to the third quarter of 2022, median prices for houses increased by 23%, while for apartments, the increase was 3%.
Distribution of transactions by price ranges.
Nicosia
Premium-class residential real estate was characterized by a moderate level of demand. From the third quarter of 2022, the total value of residential real estate transactions amounted to 772 million euros, with 259 million euros (34%) attributed to the premium segment of the market. It is noteworthy that 201 million euros were attributed to apartments, as they constitute the primary premium product in the area.
Distribution of transactions by price ranges.
In the third quarter of 2023, the median transaction price was 778,000 euros for premium-segment houses and 254,000 euros for apartments. Compared to the third quarter of 2022, median prices increased by almost 14.4% for houses and decreased by 0.4% for apartments.
Larnaca
Premium-class residential real estate experiences relatively low demand in Larnaca. From the second quarter of 2022, the total value of residential real estate transactions amounted to 613 million euros, with 161 million euros (26%) attributed to the premium segment of the market. It is worth noting that 112 million euros were attributed to apartments, as they constitute the primary premium product in the area.
In the second quarter of 2023, the median transaction price for premium-class houses was 597,500 euros, and for apartments, it was 255,000 euros. Compared to the second quarter of 2022, median prices decreased by 4.4% for houses and 15% for apartments.
Distribution of transactions by price ranges.
Sales volume and average prices.
Famagusta
Premium-class residential real estate experiences relatively low demand in Larnaca. From the second quarter of 2022, the total value of residential real estate transactions amounted to 613 million euros, with 161 million euros (26%) attributed to the premium segment of the market. It is worth noting that 112 million euros were attributed to apartments, as they constitute the primary premium product in the area.
Premium-class residential real estate experienced particularly low demand in Famagusta. From the third quarter of 2022, the total value of residential real estate transactions amounted to 231 million euros, with 66 million euros (29%) attributed to the premium segment of the market. It is worth noting that 44 million euros were attributed to houses, as they constitute the primary premium product in the area.
Distribution of transactions by price ranges.
Sales volume and average prices.
Real Estate in Cyprus as an Investment Asset
Despite periodic fluctuations, the real estate sector, particularly the premium-class segment, has demonstrated exceptional resilience for several decades, establishing itself as a reliable investment asset.
In recent years, the number of foreign investors has increased. The top 5 countries whose citizens actively engaged in property purchases include:
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United Kingdom;
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Belarus;
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Ukraine;
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Israel;
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Russia.
In 2023, almost half of all transactions were attributed to foreigners.
Distribution of transactions by price ranges.
While real estate prices have often fluctuated, a clear trend of their increase is noticeable. Property profitability is determined through its ROI, derived from rental income. During the high season, which lasts from June to September, the ROI for short-term rentals of investment properties can reach record-high levels of 15–35% annually.
Investors were acquiring properties with high returns and potential for future appreciation. These included both commercial properties and residential complexes geared towards rentals, attracting investors with their profitability and portfolio diversification opportunities.
Several factors influenced property prices, such as the specific region (for example, Limassol experiencing the highest prices), proximity to the sea, infrastructure development, the presence of a pool and recreational areas, quality of materials and finishes, local demand, technological amenities, and more.
Regions and Types of Residential Properties for High ROI Rental:
Regions and Types of Commercial Properties for High ROI Rental:
Interest in Eco-Friendly Real Estate
Among the new trends, the growing popularity of environmentally friendly and energy-efficient real estate is noteworthy. This represents an innovative approach to construction and building operation, aimed at minimizing energy and resource consumption. It involves the use of renewable energy sources, improved insulation, efficient heating, ventilation, and lighting systems, and various other technological solutions aimed at reducing the environmental footprint.
For investors, purchasing such real estate is not only an investment in the future but also a significant reduction in operational expenses. Savings on utility bills, reduced energy costs, and long-term property value appreciation make eco-friendly real estate an attractive investment. It combines long-term sustainability with financial benefits.
Economic Policy and Market Perspectives
Against the backdrop of the global economic downturn, the real estate market in Cyprus continues to be a stable asset. The country's business policy is oriented towards creating favorable conditions for foreign investors.
In 2023, significant changes occurred in Cyprus's legislation. The Parliament passed a bill to increase the VAT rate on real estate transactions. Previously, there were favorable conditions where, when purchasing new housing from a developer, the buyer received a special VAT rate of 5% for the first 200 sq. m, and the rest of the area was subject to a rate of 19%. However, these favorable conditions no longer apply. Housing is now categorized, and the 5% rate applies to the first 90 sq. m for apartments and 170 sq. m for houses. The entire remaining area is subject to a 19% rate. These changes may impact the real estate market in the future.
Currently, the island nation has high growth potential, a stable economy, and reliable prospects for foreign investors.