The real estate industry has seen new revenue highs over the past two years, despite the pandemic COVID-19, the current political and economic situation.
In 2021, foreigners purchased up to 40% of all properties in Paphos according to data from the Cypriot Department of Lands and Surveys. Although foreign buyers increased in every district of Cyprus except Nicosia until late 2021, the future share of foreign buyers must be considered considering recent world events.
In the current economic climate, consumers are increasingly inclining toward renting. Millennials are delaying marriage and family to focus on their careers, making renting a more attractive option. However, baby boomers are now moving into single-level, less maintenance-intensive properties, which better suit their changing lifestyles.
Along with the subprime mortgage crisis, those factors have led to structural changes in the industry. Prior to the mortgage crisis, most real estate investments were made by institutional investors (those who owned more than 10 properties), whereas today, most properties are owned by single investors and are not owner-occupied. Rather than first time homebuyers, investors have driven the recovery in housing prices, demonstrating a shift in demand.
Most foreign buyers have purchased properties in Paphos and Limassol in recent years, while the least amount has purchased homes in Nicosia. These transactions are often made to gain permanent resident and/or an investment through long-term rentals of these homes.
There have been highest number of foreign buyers in Paphos (40% – 41% in the last two years), followed by Larnaca (20%-21%), Limassol (18%-19%), Famagusta (14%-19%), and Nicosia (8%). British retirees prefer Paphos, Russians prefer Limassol and other foreigners prefer Nicosia the least.
Temporary Government measures have decelerated the country’s rising unemployment rate during the pandemic. The IMF reports that the labour market had recovered slightly by the end of 2021, reflecting economic recovery, particularly in the tourism industry.
As a result of the pandemic, output returned to pre-pandemic levels and unemployment declined. With a recovery in exports, the current account deficit narrowed to 7¼ percent of GDP. Due mainly to higher energy prices, inflation edged up.
The fallout from the political situation will set back growth this year, which is forecast at around 2% with a partial recovery in exports and private consumption. Combined with structural reforms, Cyprus’s Recovery and Resilience Plan will support investment spending.