Cyprus’ property market is feeling the brunt of hiking building costs and interest rates as Cypriots see their dream of owning a home dashed, with real estate stakeholders pinning their hopes on foreign buyers.

Real estate agents and developers say a rise in demand from foreign investors will balance the gap caused by the loss of local buyers.

According to recent data from the Statistical Service, the Construction Materials Price Index for November reached 133.94 units, marking an increase of 12.65% compared to the same month of 2021.

In comments to the news site Stockwatch, Michalis Zavos, CEO of D. Zavos Group, said two tendencies will shape the market, the loss of local buyers and the increase in foreigners looking for investment opportunities or eyeing a move to the island.

“Unfortunately, the number of Cypriots who can buy a house or apartment will be decreasing due to the increase in interest rates, making obtaining a loan next to impossible,” said Zavos.

He added that, on the contrary, the market would see heightened interest from foreigners coming to Cyprus to do business within the framework of the tax incentives provided by the government or looking to invest in the real estate sector.

“The high yield that Cyprus real estate still has to offer is much bigger than that in their home country, where prices no longer have much room to increase and provide profit.

“Consequently, the market in 2023 will be affected by two factors.

“One would be the loss of Cypriots who cannot buy and foreigners who come to Cyprus to invest in properties with a high annual return of 6% to 8%.

“For example, a property in the range of €250,000 to €300,000 is rented from €1,700 to €2,000 per month,” said Zavos.

Cyfield CEO George Chrysochos said property prices are expected to be pushed up by the supply shortage.

“The increase in the numbers of Russians and Ukrainians, Lebanese and Israelis eyeing Cyprus property, but also the repatriation of Cypriots from Britain, or from other countries, especially after the two years of Covid, have inflated demand.

“Foreign investors come to Cyprus to do business and find neither offices nor apartments to stay in.

“There are properties under construction, but it is not enough”.

Regarding the increase in prices. Cyfield’s CEO said: “This year, they are expected to increase at a more reasonable rate, between 5% and 10%, compared to last year’s 20% or 25% increases”.

The president of the Federation of Associations of Building Contractors (OSEOK), Stelios Gavriel, noted, “the increase in the cost of building materials, which increased by over 30% from November 2020 to November 2022, has affected the construction of new housing units for Cypriots.

“They are now having second thoughts”.

Gavriel also confirmed an increase in large projects such as offices and residential apartment complexes.

He argued that the market is overheated by an increase in public projects to be carried out in 2023 and 2024 worth close to €1 billion.