Predictions for the property market

property market predictionsOver the past few years, property prices in Cyprus have been falling due to the credit-crunch, the recession and as a result of the problems faced by buyers making headline news in the UK.

According to the RICS Cyprus Property Price Index, the housing market performed poorly in 2010, with price falls over the year averaging more than nine percent.

In July 2011 and after much debate, the Cyprus government revised a number of laws to improve the legal protection afforded to those buying property and in August it reduced the VAT for first-time buyers to 2%. These changes will undoubtedly increase sales, but how many cannot be predicted with any degree of certainty.

Banks have tightened their lending criteria which has dampened the prospects for a recovery in the market in the near future.

State of the market

Apartment prices

Prices of residential apartments fell by an average of 11.2% during 2010. The areas popular with overseas investors and local summer home buyers experienced the worst of the falls; prices in Paralimni/Famagusta slumped 23.2%, those in Larnaca dropped by 14.4% and those in Paphos fell by 10.2% over the year.

Prices in the port town of Limassol fell by 6.6%, while those in the capital Nicosia fell by just 2.4% over the year.

House prices

House prices in residential areas fell by an average of 7.4%. The worst hit area was Larnaca, where prices fell by 13.2%, followed by Limassol (-10.0%), Paphos (-7.2%), Paralimni/Famagusta (-5.1%) and finally Nicosia, where house prices fell by just 2.3% over the year.


During the peak year of 2007, overseas investors bought 11,281 properties. But by 2009, this number had fallen by 84%  to a mere 1,761. There was a marginal improvement in 2010, when overseas investors purchased 2,030 properties, and 2011 seems to be on course to achieve a similar number of sales.

Sales to local buyers have fallen sharply due to the continuing uncertainties about the Cypriot economy. Unemployment levels reached an unprecedented 7.6% in June 2011 up from 6.5% in June 2010 - one of the highest increases in the EU.

Rental yields

The latest independent assessment of the market carried out by RICS Cyprus (The Royal Institute of Chartered Surveyors) and published in July 2011, shows that rental yields remain poor. These suggest that there is still room for rebalancing to take place.

Initial (or gross) yields, as shown in the chart below, is the total yearly gross rent divided by the price, expressed as a percentage.

Cyprus property rental yields