The real estate market "doesn't care" about interest rate hikes

Domestic real estate demand remained on an upward trajectory until the second quarter of 2023, seemingly unaffected by the increase in key interest rates of the European Central Bank (ECB) and the consequent reduction in housing loan demand.

Data from the Central Bank shows that the number of paper sales rose to a 15-year high in the second quarter of 2023, supporting the upward trend in prices.

Domestic demand is driven by investments for the purpose of renting (buy-to-let), while external demand is based on the policy of transferring headquarters of foreign companies (headquartering).

Prices and demand are on the rise

According to the housing price index announced today by the Central Bank, which is also presented on StatWatch , housing prices in Cyprus, especially apartments, continued their upward trend during the second quarter of 2023, mainly due to increased demand.

During the second quarter of 2023 the Central Bank of Cyprus (CBC) House Price Index (CPI)1 (houses and apartments) continued to record, both on an annual and quarterly basis, increases compared to previous quarters.

The CPI (houses and apartments) in the second quarter of 2023 registered an increase of 1.5% compared to an increase of 2.1% in the previous quarter.

The rise in the CPI in the second quarter of 2023 compared to the previous quarter comes from a 0.7% increase in house prices and a 3.1% increase in apartment prices.

On an annual basis, house prices are projected to increase by 7.4% in the second quarter of 2023, compared to 7.7% in the first quarter of 2023.

The prices of apartments recorded an increase of 10.1% and of houses by 5.6% in the quarter under review.

The recorded increases concern the CPI in all provinces.

Fifteen-year high in sales

As recorded in the data of sales documents of the Department of Cadastre and Land Surveying (TCX), the number of transactions in the real estate market during the second quarter of 2023 saw an increase on an annual basis.

The number of sales documents during the reporting period recorded the highest level in the last fifteen years.

Domestic buyers made up the largest proportion of transactions, while the largest annual increase in sales documents came from foreign buyers.

It is emphasized that increased demand, in relation to the limited supply of new housing, appears to be the most important factor contributing to the increase in the CPI in the second quarter of 2023, as in the previous quarters.

Boost from headquarters and buy-to-let

The increased demand from foreigners is mainly due to the "headquartering policy", as well as the increased number of students and other investors in the real estate market.

The increased domestic demand appears to be mainly due to buy-to-let investments.

Source: stockwatch.com.cy

Photo: stockwatch.com.cy