Filenews 16 September 2024
In projects tailored to the needs of foreign investors who are now seeking residence permits, instead of the luxury homes they were looking for under the "golden passport" program, the real estate market has been aligned.
According to Danos International Real Estate Consultants and Appraisers, sales of luxury homes worth more than €1.5 million. in Cyprus recorded a notable decline in 2023, shifting interest towards lower value housing projects. Investors are now looking for more "affordable" homes that offer residency instead of citizenship.
This trend, clearly recorded in 2023, is expected to continue in 2024, according to data from the second quarter of the year. "Analysis of transaction data for single-family homes priced at €1.5 million or more in the first months of 2024 shows a slight increase compared to the previous year. However, this increase was minimal, and the overall market is still recovering from the significant drop in sales in 2023. Data shows that property sales in this price category fell by 26% in 2023 compared to 2022, signalling a significant downturn in the luxury housing market. In 2023, a total of 164 real estate transactions worth €1.5 million or more were recorded, bringing the total value of these transactions to €440 million. Despite this significant amount, the contribution of luxury properties to the overall real estate market was relatively small, accounting for just 8% of total transaction value," according to the bureau.
It is explained that the downward trend in high-value real estate transactions continues since 2018, after the peak period 2016-2017, when luxury home sales were at their highest levels. The size of the luxury home market in 2023 appears to have halved compared to peak years and has returned to levels seen during the COVID-19 pandemic. Luxury properties (worth more than €1.5 million) contributed just 8% of total transaction value in 2023, representing the lowest contribution from this segment since 2013.
According to Danos, "historical data show that 2017 was a particularly strong year for the luxury real estate market in Cyprus, with the sale of 260 properties (+24%) worth more than €1.5 million. This was the peak of demand for luxury properties, largely due to foreign investors seeking Cypriot citizenship through the Naturalization through Investment Scheme. The success of 2017 contributed significantly to the broader recovery of the Cypriot real estate market, which was hit by the 2013 financial crisis. The luxury housing market also experienced significant growth in 2016, with a year-on-year increase of 43% compared to 2015. The demand for real estate in this price segment continued to grow in the following years, particularly after the revisions made to the Naturalization through Investment Program, making it more attractive to foreign investors. However, with the end of the program in 2020, demand for luxury real estate has gradually declined as the investor profile has changed."
The data show, according to Danos & Associates, that during the period 2010-2013, the volume of luxury home sales in Cyprus remained stable, with an average of about 40 units per year. However, from 2014 onwards, following changes in the naturalization program, demand for properties worth more than €1.5 million increased significantly, reaching its peak in 2017. Since then, the the market has slumped, and attention has shifted to mid-range properties aimed at foreign buyers seeking residence permits.
Strong interest despite challenges
The future of the real estate market in Cyprus is expected to be moderately growth in the coming years, as high interest rates stabilize demand, explains Kyriakos Koiliaris, Chief Marketing Officer of Danos office. "Although the luxury real estate market is unlikely to return to its 2017 peak levels, the broader real estate market will continue to be supported by foreign investment. Geopolitical tensions in the region, particularly in the Middle East, are expected to continue to drive interest from foreign buyers, especially from Europe and Asia. The Cyprus Residence Scheme, often referred to as the "golden visa", remains a key driver of foreign investment in the country's real estate sector, offering residence permits to non-European citizens investing in Cypriot real estate. Despite challenges from rising construction costs and new regulatory changes, foreign investors continue to show strong interest in Cypriot real estate."
