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Property in Cyprus: what to know and where to buy in 2016

Property prices in Cyprus have been falling since 2009 but things are finally looking up now that the economy is bouncing back from the banking crisis of 2012−2013. In 2015, the price decline slowed significantly and experts anticipate that residential property will recover in the near future, meaning that house prices could start to rise soon.

Price dynamics

Residential property prices fell 27% since the 2008 crisis but in 2014, an upward trend emerged. It has been complimented by a surge in residential real estate development: last September, the amount of new houses put on the market increased by 6.8% year-on-year. This is the first construction volume growth since 2013.

Property price dynamics in Cyprus
Q4 2014−Q3 2015

Q4 2014 Q1 2015 Q2 2015 Q3 2015
House Price Index 89.95 87.39 93.89 93.27
Quarterly price change, %  −1.1  −2.8  +7.4  −0.7
Annual price change, %  +0.8  +0.6  +2.4  +2.5
Source: Central Bank of Cyprus

Renewed development activity has been followed by an increase in transactions: property sales grew by 6.0% in Q3 2015, compared to the same period in 2014. Moreover, according to a report by the Central Bank of Cyprus, the number of property transactions to foreign buyers increased by 15.8% during the same period, while local activity only gained 2.7%.

Locations and prices

The average price for a two-bedroom flat in Cyprus runs at €100,000, according to data by the Royal Institute of Chartered Surveyors (RICS), but prices vary depending on the region. In the most expensive areas of the island, prices are slightly higher.

Average flat prices in Cyprus,
85 sq m two-bedroom flat, medium quality

City Price, EUR
Larnaca 112,037
Limassol 105,684
Nicosia 105,254
Paphos 096,545
Paralimni 080,364
Average 099,997
Source: RICS Cyprus Property Price Index Q4 2015

The most popular places with buyers are Limassol, Paphos, Larnaca, Paralimni and Nicosia.

Limassol is regarded as the second capital of the Republic. It's a hive of activity with the most expensive flats and a wide choice of prime property.

Paphos is famous for its landscape: many houses are located on hills with breath-taking views over the sea. It is perfect for those who want a quiet and relaxing lifestyle.

Larnaca has beautiful beaches and an international airport that is a good place for buyers with medium budgets. Not far from here is the Paralimni resort, which has the cheapest property on the island.

Nicosia, the capital, is not popular with foreign holiday buyers because it is far from the sea, but business visitors are a lot more active on the property market here.

Julia Dorokhina Julia Dorokhina Real Estate Expert

A three-bedroom home with a garden in Cyprus costs €326,000 on average but prices vary greatly depending on the available amenities and location. The most expensive houses are in the capital.

Average house prices in Cyprus,
250 sq m semi-detached three-bedroom home with garden

City Price, EUR
Larnaca 277,222
Limassol 304,105
Nicosia 372,714
Paphos 353,991
Paralimni 320,916
Average 325,790
Source: RICS Cyprus Property Price Index Q4 2015

Mortgages and financing

Foreign citizens don’t face any obstacles when applying for a mortgage in Cyprus. The average interest rate is currently 3.32%, compared to 4.27% in 2014. By leaving the loan terms unaltered and dropping the interest rate, the Central Bank of Cyprus hopes to stimulate lending in order to encourage demand for residential property.

Banks in Cyprus usually grant mortgages for a loan-to-value ratio (LTV) of 70/30. Buyers also have the option of taking out a loan in a foreign currency for a maximum term of 15 years. The main restriction prohibits buyers from taking out a loan for which repayments exceed 40% of the borrower's average monthly income.

Rental market

Rental rates are still declining in Cyprus. By Q4 2015, the average rate for apartments was 1.5% cheaper than the previous year and house rentals lost 0.5%. Currently it costs about €326 per month on average.

Flat rental rates per month in Cyprus,
85 sq m two-bedroom flat, medium quality

City Rental rate, EUR Initial yield, %
Larnaca 333 3.6
Limassol 373 4.2
Nicosia 377 4.3
Paphos 274 3.4
Paralimni 271 4.1
Average 326 3.9
Source: RICS Cyprus Property Price Index Q4 2015

House rentals cost about €539 per month on average for a medium quality semi-detached 250 sq m home with three bedrooms and a garden.

House rental rates per month in Cyprus,
250 sq m semi-detached three-bedroom home with garden

City Rental rate, EUR Initial yield, %
Larnaca 479 2.1
Limassol 629 2.5
Nicosia 599 1.9
Paphos 541 1.8
Paralimni 445 1.7
Average 539 2.0
Source: RICS Cyprus Property Price Index Q4 2015

The simultaneous decline in prices and rental rates has stabilised yields, which remain much better for flats (3.9%) than for homes (2.0%).

Future trends and influencers

Key economic indicators
2014–2017

Indicator 2014 2015 2016
(forecast)
2017
(forecast)
GDP growth, annual change, % −2.5 +1.4 +1.5 +2.0
Inflation rate annual change, % −0.3 −1.6 +0.2 +1.3
Unemployment rate, % 16.1 15.5 14.5 13.2
Source: European Commission

The revival has largely benefited from local and EU-wide economic recovery. In 2015, the country’s GDP growth rate finally struck a positive note and grew by 1.4%. European authorities now anticipate further gains of 1.5% in 2016 and 2% in 2017. Internal and external demand as well as falling unemployment combined with low interest rates on mortgages and low inflation should also support the real estate recovery.

Ivan Chepizhko, Tranio

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