Cyprus economy update
In 2021, the economy recovered strongly, with GDP reaching almost pre-crisis levels, mainly due to domestic demand and better-than-expected tourism performance. Despite lockdown measures during the first quarter of 2021, the Cyprus economy was able to recover strongly by the end of that year.
According to IMF forecasts, the GDP has grown by 4,8% during 2021, almost reaching pre-crisis levels. As a result of the accelerating pace of vaccinations and the improved epidemiological situation on the island, domestic demand (aided by government measures to combat the pandemic) and relatively positive tourism performance (although still below pre-pandemic levels) are mainly responsible for the increase in GDP.
According to the European Commission report (dated Autumn 2021), the implementation of the reforms in the Recovery and Resilience Plan of the Government and the Growth Strategy currently under preparation is expected to have a positive impact on the economy in the medium and long term.
Cyprus’ housing market stabilizes, amidst an improving economy.
After a major pause last year due to the COVID-19 pandemic, Cyprus’ housing market is now showing signs of recovery. Low-interest rates, coupled with government relief measures, are currently driving property demand and construction activity.
During the year to Q1 2022, the nationwide residential property price index rose slightly by 0.91% (1.64% inflation-adjusted), a slowdown from the 1.82% y-o-y rise seen in Q1 2021, according to the Central Bank of Cyprus (CBC).
On an annual basis, the RPPI registered the following changes in house and apartment prices:
• Nicosia: houses -0.2%, apartments +3.4%.
• Limassol: houses +2.1%, apartments +6.9%.
• Larnaca: houses +1.3%, apartments +2.4%.
• Paphos: houses +4%, apartments +10.6%.
• Famagusta: houses +2.4%, apartments +8.3%.
Central Bank notes that domestic demand is largely responsible for continued price growth, but foreign investors’ demand and rising construction costs are also becoming factors.