The number of sales contracts submitted in the Department of Land and Surveys reached a 15-year record high in the second quarter of 2023, according to data published by the Central Bank of Cyprus on Thursday. In addition, residential property prices in Cyprus continued recording significant increases, on a quarterly as well as annual level.

In 2023Q2, the Residential Property Price Index of CBC registered a 1.5% increase compared to a 2.1% increase in the previous quarter. According to the CBC, the increase comes from a 0.7% increase in house prices and a 3.1% increase in apartment prices.

On an annual basis, residential prices recorded an increase of 7.4% in the second quarter of 2023, compared to 7.7% in the first quarter of 2023, with apartment prices increasing by 10.1% and houses by 5.6%.

Local buyers made up the largest proportion of transactions, while the largest annual increase in sales contracts came from foreign buyers.

Increased demand, coupled with limited new housing supply, appear to be the most important factors contributing to RPPI growth in the second quarter of 2023, the CBC says. The increased demand from foreigners is mainly due to the "headquartering policy", as well as the increased number of students and other investors in the real estate market, while the increased local demand seems to be mainly due to investments for the purpose of renting (buy-to-let).

In addition, the CBC reports that up to the second quarter of 2023, the European Central Bank's (ECB) increase in key interest rates and the consequent reduction in mortgage loan demand do not appear to have affected domestic demand for real estate to a substantial extent, which continues to to remain on an upward trajectory.

Therefore, and with construction costs stabilising through 2023, increases in home prices are driven primarily by increased demand combined with limited supply, the CBC notes.

Price changes by district

In the second quarter of 2023 residential property prices increased in all provinces on a quarterly basis. Specifically, an increase of 1.5% was recorded in Nicosia, 1.4% in Limassol, 2.7% in Larnaca, 2.7% in Paphos and 2% in Famagusta.

Regarding year-on-year changes, an increase was recorded in all provinces for the seventh consecutive quarter. Specifically, in Nicosia property prices increased by 4.4%, in Limassol by 10.1%, in Larnaca by 8.7%, in Paphos by 7.9% and in Famagusta by 5.9%.

On a quarterly basis, house prices recorded increases in all provinces except Limassol, where a marginal decrease was recorded. Specifically, in Nicosia house prices increased by 1.8%, in Larnaca by 1.7%, in Paphos by 0.9% and in Famagusta by 1.9%, while in Limassol they recorded a drop of 0.4%.

On an annual basis, house prices recorded an increase in all provinces. Specifically, house prices in Nicosia, Limassol, Larnaca, Paphos and Famagusta increased by 4.8%, 6.5%, 6.3%, 4.7% and 7.4%, respectively.

Apartment prices on a quarterly basis recorded an increase in all provinces. Specifically, they increased by 1.4% in Nicosia, 4% in Limassol, 4.1% in Larnaca, 6.5% in Paphos and 2.5% in Famagusta.

On a year-over-year basis, apartment prices rose in all provinces for the eighth consecutive quarter. Specifically, in the second quarter of 2023, apartment prices in Nicosia increased by 4.2%, in Limassol by 13.9%, in Larnaca by 13.1%, in Paphos by 16.3% and in Famagusta by 2.5 %, compared to the corresponding quarter of 2022.

Sales contracts increase

CBC also reports that sales contracts in the second quarter of 2023, rose 26.5% year-on-year, with 4,115 sales contracts submitted, compared to 3,254 in the second quarter of 2022, marking a fifteen-year high.

Specifically, there was an increase of 38.5% on an annual basis in the number of properties sold to foreign buyers (1,871 compared to 1,351 in the second quarter of 2022), while the number of properties sold to local buyers increased by 17.9% on an annual basis (2,244 compared to 1,903 in the second quarter of 2022).

Mortgages drop

Following the ECB rates increase, CBC says that new loans for the purchase of housing in the second quarter of 2023 decreased by 2.9% year-on-year (€248.7 million in the second quarter of 2023 compared to €256.1 million in the second quarter of 2022). Also, the mortgage interest rate during the second quarter of 2023 continued to register increases, having averaged 4.28%, compared to 3.74% in the first quarter of 2023 and 2.27% in the second quarter of 2022. Also, CBC reports that the funding criteria became stricter compared to the previous quarter.

Building Permits decrease

Regarding the number of residential units for which building permits have been approved, which is a leading indicator of construction activity, a 13% decrease was recorded, dropping to 788 in April-May 2023, compared to 906 during the same period of 2022.