Real estate: trust the numbers, not rumors

There is no doubt that the housing market in Cyprus is seriously affected by the global financial crisis and its own banking debt crisis. The combination of depressed sales and excessive accumulation of supply led to a sharp drop in real estate prices from 2008 to 2015.

However, the real estate market is cyclical in nature and is currently in a recovery stage, where growing demand is slowly absorbing existing supply. Gradually, this will lead to stabilization, and real estate prices will continue to grow lately at a slow pace.

In the end, the market will reach its long-term average level of employment, where growth will be equal to inflation, and the market will move to the next stage. Sales in Cyprus increased significantly - by about 29% from 2015 to 2016 and by about 20% from 2016 to 2017. In fact, in 2018 this figure fell to a healthy 6%, which indicates that the market will stabilize in the coming years until it reaches equilibrium.

So, if you look at the last five or six years, the statement that the real estate market is not synchronized with the basics is incorrect. An assessment of a much shorter period (say, the last six or 12 months) is not indicative and can lead to all sorts of false conclusions.

The statement “bubble” will instantly burst if the CIP (Cyprus Investment Program) scheme ceases” absolutely groundless and based on market rumors rather than reliable economic and statistical data.

There is no doubt that the CIP has influenced market growth and will continue to have this impact; but the key factor is how much the market depends on this scheme.

According to the latest report by KPMG Cyprus Real Estate Insights, in 2018 the number of transactions related to luxury residential real estate sold for more than 1 million euros was just over 500, while the total number of real estate transactions throughout the country over the same period was 9,242. This indicates that elite residential complexes - a type of real estate, which is often directly related to the CIP scheme - make up only 5.5% of the total number.

Moreover, historical data (1999–2006) shows that Cyprus has always had a strong foreign market, which until 2013 had nothing to do with any CIP scheme. In addition, a stable number of CIP applications (about 500 each year) and the number of transactions of elite residential properties (also about 500 each year) indicate that they are not directly proportional to the increase in the number of real estate transactions in the country that exceeded 9,000 this year.