Cyprus Real Estate: Why Prices Are Not Coming Down Any<me Soon

Cyprus has been a-rac/ng foreigners for tourism, real estate, and business purposes for the past 30 years. This has brought in significant amounts of money into the economy, transferred exper/se to locals, and boosted businesses with more affluent clients.

However, since the Russia-Ukraine war broke out in early 2022, over 20,000 Ukrainians, Belarussians, and Russians have relocated to Cyprus, with many se-ling in Limassol to take advantage of the favorable tax regime. Fintech companies from the warring countries and neighboring Belarus have also moved to Cyprus, bringing in new wealth and talent. Russianlanguage communica/ons company Vestnik Kipra reported having 3,000 new IT professionals on its roster in May 2022 with some of their employees earning more than €5,000/month. The Limassol mayor es/mated over 10,000 Ukrainians moving to the city since the war.

The "headquartering ini/a/ve" by the Cypriot government has also a-racted overseas companies to set up opera/ons on the island, resul/ng in 4,524 families applying for reloca/on up to August 2022.

Addi/onally, Israel's recent poli/cal changes have prompted a surge of inquiries for emigra/on from its ci/zens, with Ocean Reloca/on receiving over 100 per day since January 2022. Cyprus has also been a popular des/na/on for Israelis, with around 10,000 applying for Cypriot residency since 2020.

Informa/on Interna/onal has reported that around 12,000 Lebanese have also come to Cyprus, with a majority being between 25 and 40 years old.

These developments have brought new challenges and opportuni/es to Cyprus and its residents.

The influx of migrants to Cyprus has led to a surge in demand for rental accommoda/on, par/cularly in popular des/na/ons such as Limassol and Paphos. Many of these migrants, have a much higher salary than the average local worker, some /mes more than 5 /mes the average salary of a local blue collar worker. As a result, paying €1,500 for rent is not a problem for these high-earning migrants.

The surge in demand for housing, combined with the high salaries of these migrants, has led to a significant increase in rent prices in Limassol and Paphos. In 2016, it was possible to rent a two bedroom apartment in Paphos for around €300 and in Limassol for around €400 per month. Now, the minimum rent for a two-bedroom apartment in Paphos is €1,000 and in Limassol can exceed €1,400 per month. This means that many locals are finding themselves priced out of the market, especially in the more desirable areas of the island.

The surge in rental prices has had a direct effect on the sales market, as foreign investors seek to purchase proper/es that yield a return of approximately 6%. The rental income generated by a property is a key factor in determining its value, as investors are willing to pay more for apartments that can be rented out for higher amounts. For instance, if an apartment can be rented for €1,000 per month, investors are willing to pay up to €200,000 to purchase it. However, if the same apartment can only be rented for €500 per month, the investor is only willing to pay up to €100,000 for it. This highlights the close correla/on between rental prices and sale prices in the real estate market.

The individuals who have recently relocated to Cyprus and are currently working online or in fintech companies, have not only invested their /me and effort in establishing themselves in the country but have also made substan/al investments in the local real estate market. This means that they are likely to stay in Cyprus for the long term, and will not be quick to leave. As a result, if there is no interven/on from the government, it is unlikely that property prices will decrease significantly in the near future. The government may need to implement certain measures to regulate the real estate market and prevent it from becoming overheated, such as imposing more limits on foreign investment or introducing incen/ves to encourage investment in other sectors of the economy. However, un/l such measures are put in place, it is expected that the real estate market in Cyprus will remain stable, with prices con/nuing to reflect the demand from both domes/c and interna/onal buyers.

Author: Property Canvas

ETEK Property Valuers, Registered and Licensed Real Estate Agency

Property Canvas is a leading real estate agency in Cyprus, specializing in property sales, investment, and valuation. Our team comprises licensed estate agents and certified property valuers with extensive experience in the Cypriot market, providing expert guidance to buyers, sellers, and investors. Our Team has authored the “Cyprus Real Estate: Why Prices Are Not Coming Down Any