The real estate sector plays a pivotal role in the Cypriot economy and during the last few years it has experienced a steady growth, reaching in 2018 a nine-year peak in sales transactions. A KPMG survey titled “Cyprus Real Estate Market Report – The Insights” which provides insightful leads into the Cypriot economy and the local real estate market, showed that sale transactions surpassed those of 2017 by 6%. Limassol had the highest share (37%) of the market for 2018, same as in 2017, followed by Paphos (24%) while Nicosia exhibited the largest year-on-year increase (+10%) in sales.
An upward trend was also recorded in regards to the issuance of new building permits, which exhibits a steady growth in numbers over the last few years but even more so in value. Nicosia is the district with the highest number of building permits (37% of total). In terms of value, Limassol is the leading city (31% of the total), closely followed by Nicosia (29% of the total). It is worth noting that the majority of building permits issued in 2018 is related to residential developments (70% of total volume), with a total value of €1,3 billion (63% of total value).
One of the main factors that have led to the increase in property transactions is, according to the survey, the improved economic conditions, which resulted in improved domestic confidence levels and to an increase in domestic demand. Additionally, a series of Government incentives have also led to a surge in foreign demand; such measures include the abolition of immovable property taxes, schemes for permanent residency and naturalisation of investors by exception. Reflective of this is the fact that non-nationals contributed 47% of total transactions activity in 2018. More specifically, the highest share of contracts of sale by non-nationals was recorded in Paphos (40%), followed by Limassol (30%), Larnaca (16%), Famagusta (10%) and Nicosia (5%).
Among the most noteworthy facts of the Real Estate sector in 2018 was the annual increase of 27% which was recorded in the volume of transactions for high value residential properties (> €1 million). Also, new Building Permits for hotels have exhibited a growth of +122% in terms of m2 during 2018, when compared to 2017 while bookings through Airbnb showed an annual increase of 71% in 2018.
The Real Estate sector’s contribution in the Cypriot economy, amounted to €2,78 billion for 2018, surpassing other critical sectors such as the Financial and Insurance Activities and the Manufacturing. In addition, while real estate and construction sector in Cyprus employs only 9% of the working population, they account for 16% of the Gross-Value Added (GVA), placing it as the third highest among the key pillars of the economy, after Tourism (25%) and Public Administration (19%).
This upward trend seems to continue in 2019. Based on figures from the Department of Lands & Surveys, during the first half of 2019, property sales in Cyprus rose by 24.4% to 5,560 units from a year earlier, following annual rises of 5.8% in 2018, 23.7% in 2017, 42.6% in 2016, 9.4% in 2015 and 20.2% in 2014. Although it is obvious that confidence is returning to Cyprus’ housing market, economic growth is projected to slow to 2.9% this year, according to the European Commission, and to 2.6% in 2020, at a moment where tourism is slowing tourism and trade tensions are escalating globally. Despite this, the housing market is expected to continue to improve and to gain momentum in the coming months, with both sales transactions and construction activity rising strongly.