The Cyprus Real Estate industry: a booming market

In 2024, Cyprus stands out in the European real estate landscape, marked by stability and growth despite the broader challenges of inflation and rising interest rates. While other countries tread cautiously, Cyprus attracts global investors with its vibrant market and appealing lifestyle

Market dynamics

According to the Cyprus International Institute of Economic and Cultural data, the real estate market in Cyprus is not merely surviving but indeed thriving. As of September 2023, house prices increased by 7.6 per cent year-on-year, following a robust growth of 7.4 per cent in the previous quarter.

This performance stands in stark contrast to the cautious advancements seen in broader European markets, where economic uncertainties and rising interest rates are more pronounced. For example, Germany and France are experiencing subdued growth due to these factors, whereas Cyprus continues to sustain its upward momentum.

A particularly notable aspect of the Cypriot market is the luxury sector. In the first quarter of 2024, an impressive 2,456 high-end properties were sold, according to a report by PwC. This surge is attributed to Cyprus’ combination of an idyllic lifestyle and solid investment prospects, emphasised by strategic positioning and attractive tax incentives. Limassol, in particular, has become a hotspot for luxury properties, commanding premium prices and drawing significant interest from investors around the globe.

Drivers of investment in Cyprus

Several factors make Cyprus a compelling destination for real estate investment.

Firstly, the island’s stable political and economic environment provides a conducive atmosphere for investment. Deloitte highlights that Cyprus’ economic performance has been resilient, even as other European nations face economic and political instability.

In addition to stability, Cyprus offers favourable tax policies that significantly enhance its appeal. KPMG notes that Cyprus has one of the lowest corporate tax rates in the European Union at 12.5 per cent, coupled with a range of tax incentives designed to attract foreign investors. These policies make Cyprus a competitive location for business operations and investment.

Furthermore, Cyprus’ quality of life is a significant draw. The island’s pristine beaches, warm Mediterranean climate, and rich cultural heritage add to its charm, making it a desirable location for long-term residence.

One of the most compelling aspects for foreign investors is the opportunity to secure permanent residency through real estate investment. Evi Pilavaki, Chief Legal Officer at bbf:, details on Cyprus’ permanent residency by investment program under Regulation 6(2) of the Aliens and Immigration Regulation. This programme allows non-EU nationals to gain residency status by making qualifying investments in the country.

Investment benefits

In a world constantly on the move, people across the globe seek new horizons for a multitude of reasons, ranging from the pursuit of career advancements and enhanced lifestyles to the necessity of escaping perilous environments. Among this global migration phenomenon, Europe remains a prime destination, hosting the largest number of migrants worldwide, as highlighted by the United Nations Department of Economic and Social Affairs Division (UN DESA).

Pilavaki elucidates the nuances of Cyprus’ new permanent residency by investment programme under Regulation 6(2) of the Aliens and Immigration Regulation. As per this regulation, the Ministry of Interior, with approval from the Council of Ministers, can grant immigration permits to non-EU nationals who make qualifying investments in the country.

Under the terms outlined by Pilavaki, investors can pursue several pathways to secure permanent residency in Cyprus. One option is to invest in residential property, specifically a new house or apartment worth at least €300,000 (plus VAT) from a development company. It is important that this investment is in new properties, and buyers can purchase up to two units, provided their combined value meets the minimum requirement.

Alternatively, investors can opt to invest in commercial real estate, which includes offices, shops, hotels, or other types of commercial properties. These investments, valued at a minimum of €300,000, can include resales, providing flexibility and broader options for potential investors.

Moreover, Cyprus offers the opportunity to invest in the share capital of a company based and operating in Cyprus. This requires a minimum investment of €300,000 and the company must employ at least five people, fostering local business growth and employment.

Investors may also choose to commit a minimum of €300,000 to units of Cyprus Investment Organisation Collective Investments, which hold investments within Cyprus. This pathway emphasises Cyprus’ diverse and inclusive approach to attracting foreign investment.

Beyond the financial commitments, applicants must demonstrate a secure annual income of at least €50,000 from abroad, increasing with additional family members. This income can come from various sources, such as salaries, pensions, or dividends. Applicants are also required to provide clean criminal records and health insurance that covers both inpatient and outpatient care, ensuring they contribute positively to the community without burdening the local healthcare system

Reflecting on the broader impacts of such investment programmes, Pilavaki points out that these initiatives not only stimulate the real estate sector but also bolster regional development and support for local businesses. “The real strength of this programme lies in its dual focus: attracting substantial foreign investment while simultaneously nurturing local economic growth,” she said.

Economic impact and sectoral performance

The real estate sector in Cyprus experienced unprecedented growth in 2023. According to Deloitte, the market saw 13,200 residential transactions amounting to €3.4 billion in sales, accounting for 61 per cent of the total sales value. This surge was driven by newly built properties, which made up 69 per cent of total residential sales. The average transaction value was €259,000, slightly up from €257,000 in 2022, highlighting a steady increase in property values.

Overall, the market recorded 25,400 transactions worth €5.6 billion. Vacant land transactions, including plots and fields, were the second most popular category, with sales totalling €1.9 billion across 11,200 transactions. Despite the higher number of transactions, the value of this category remained stable compared to 2022.

Geographically, Limassol continued to dominate the market, contributing 41 per cent of the total sales value.

While cities like Nicosia and Paphos recorded marginally lower sales values compared to 2022, Larnaca stood out with a remarkable 28 per cent increase in sales value. This growth was driven by both an increased number of transactions and higher average transaction values, marking the third consecutive year of expansion for Larnaca, which has nearly doubled in both value and volume since 2020.

The broader economic impact

According to the Cyprus Land Registry, the first quarter of 2024 saw 2,456 sales contracts with a total value of €585 million. The high-end property market recorded 659 transactions, representing 27 per cent of all deals during this period, with a collective value of €290 million, accounting for nearly half of the overall market value.

In Limassol, the demand for premium residential properties is particularly pronounced, with 322 of the 635 property transactions coming from the high-end segment, indicating a robust appetite for luxury living.

Paphos, Nicosia, and Larnaca also reported healthy sales, with the high-end market showing varying degrees of demand across these regions.

Deloitte’s insights further reveal the broader economic impact of the real estate sector, stating, “Recognising the vital role of the Real Estate industry in our economy, which serves as a major indicator of economic activity in any country, we are thrilled to unveil the inaugural Deloitte Cyprus Real Estate Market report.” This statement highlights the sector’s crucial role in driving Cyprus’ economic activity and attracting foreign investment, portraying a sector integral to national growth.

The future and ESG considerations

Looking to the future, the investment landscape is increasingly being shaped by the rising importance of Environmental, Social, and Governance (ESG) considerations. Investors are no longer solely focused on financial returns but are also evaluating the sustainable impact of their real estate investments. In Cyprus, this trend is gaining momentum as developers and investors prioritise sustainability in their projects, aligning with the global shift towards more responsible investment practices.

PwC reports that ESG factors are now central to investment decisions, shaping the future of real estate in Cyprus and beyond. This focus on sustainability positions Cyprus favourably as the country continues to innovate and attract investment in green and sustainable real estate developments. Investors are increasingly looking for projects that not only offer financial returns but also contribute positively to the environment and society, making ESG considerations a cornerstone of modern real estate investment.

As we wrap up Cyprus’ real estate scene in 2024, it’s clear that this Mediterranean island is not just weathering the European economic storm—it’s thriving. With its combination of robust growth in luxury developments and appealing tax incentives, Cyprus is drawing attention far and wide. This growth isn’t only appealing to deep-pocketed international investors; it’s also creating opportunities for local buyers, making the island a lively market for all involved. Amidst a broader European backdrop of caution, Cyprus stands out as a dynamic and resilient hub for real estate, promising prosperity and a high quality of life for residents and investors alike.