As a real estate office, we are aware of the current market conditions and the challenges faced by those looking to purchase a home in Cyprus. Increased mortgage rates, coupled with rising rents, have made it difficult for many to afford a home. Interest rates on mortgages are expected to reach 5% by the end of next year, adding to the cost for buyers. Additionally, the housing market is experiencing a new cycle of price increases, particularly in the capital city of Nicosia.
Furthermore, the war in Ukraine and the related geopolitical changes, the EU’s quick transition away from Russia as its primary energy supplier, and the rise in interest rates have all resulted in a significant repricing of risk across asset classes, particularly those that are highly leveraged such as real estate. This repricing will continue in 2023, especially as other investment opportunities increasingly appear to be more appealing.
For a €200,000 mortgage, with an average market interest rate of 4.5%, the monthly installment is around €1,270. This is just under the average salary in Cyprus, with the median wage being €1,573. Furthermore, buyers are required to have a deposit set aside to finance at least 30% of the property’s value. With these financial constraints, borrowers can only afford to buy an apartment of less than 100 sqm, most probably not new.
However, there are options available such as plans provided by Cyprus banks which have a fixed interest rate in the first years, so the loan installment does not change depending on the policies followed by the ECB.
Furthermore, rental prices are also expected to increase in the coming year, with rents in Larnaca and Paphos expected to double, and Famagusta and Limassol also experiencing significant increases. This makes it even more challenging for buyers to save for a deposit and secure a home loan.
Despite these challenges, we believe that there are still opportunities for buyers in the Cyprus real estate market. We have a range of properties available in various areas and are dedicated to assisting buyers in finding the perfect property to suit their needs and budget. We recommend buyers to consider their options, and the costs associated with buying and renting, before making a decision. We will work with them and the banks to help them to obtain the property they desire.