Construction costs and increased demand from foreign and local buyers contributed to the acceleration in house price increases during the third quarter of 2022.
According to the Central Bank of Cyprus (CBC), the Residential Property Price Index (RPPI) continued its upward trend in the third quarter of 2022, increasing by 2.1% compared to a 1.7% increase in the previous quarter, while year-on-year the index increased by 6.3% compared to a 4.7% increase the previous quarter.
Real estate transactions in the first nine months of 2022, as recorded in the Lands and Surveys Department's sales document data, are showing accelerated growth, attributed to year-on-year increases in demand from both domestic and foreign investors.
Inflationary pressures, which have a significant impact on construction costs, continued in Q3, but so far do not seem to be having a negative impact on demand.
The RPPI concerning houses and apartments, registered a quarterly increase of 2.1% in the third quarter of 2022 compared to 1.7% in the previous quarter. The rise comes from a 2.2% increase in apartment prices over the previous quarter and a 2.0% increase in house prices over the same period.
On a year-over-year basis, house price growth also accelerated by 6.3% in the third quarter of 2022, compared to 4.7% in the second quarter of 2022. Apartment prices during the quarter under review recorded an annual increase of 8% and house prices by 5.2%.
Demand by foreign professionals in the context of government's international headquartering programme, is considered the most important drive for the demand by foreign investors.
In the third quarter of 2022 house prices on a quarterly basis increased in all districts. Specifically, an increase of 1.2% was recorded in Nicosia, 3.0% in Limassol, 1.2% in Larnaca, 2.6% in Paphos and 2.3% in Famagusta.
An increase was also recorded in all districts on an annual basis. Specifically, in Nicosia house prices increased by 4.4%, in Limassol by 8%, in Larnaca by 2.8%, in Paphos by 8.2% and in Famagusta by 8%.
According to the latest figures from the Department of Lands and Surveys (DSS), the number of sales documents continued to increase in the third quarter of 2022 by 33.8% year-on-year (3,347 compared to 2,502), reflecting increased demand for real estate.
Additionally, during the quarter under review there was a 67.3% year-on-year increase in the number of properties traded to foreign buyers (1,506 compared to 900), driven by a 32% increase in purchases by residents within the European Union (EU) and 104, 1% increase in purchases from non-EU residents.
At the same time, inflationary pressures and the rise in key ECB interest rates seem to have negatively affected the demand for new housing loans.
According to the CBC’s Monetary and Financial Statistics, new mortgage loans in the third quarter of 2022 decreased by 12.3% and 6.7% on an annual and quarterly basis respectively, amounting to €238.8 million in the third quarter of 2022 compared to €273 m in the third quarter of 2021 and €256.1m in the second quarter of 2022.