Shifting Focus to Commercial Properties
The report highlights a growing trend where commercial properties are increasingly being used for professional and workspace purposes rather than for residential use, although residential applications are not completely excluded. These commercial properties range from small eateries to expansive retail parks.
Challenges and Benefits of Commercial Property Investment
As with any investment, commercial properties have their risks, such as potential damages and internal space malfunctions. However, the longer lease durations typical in commercial properties often lead tenants to take better care of the spaces, mitigating some of these risks. Another key advantage is that commercial properties tend to appreciate in value more rapidly than residential ones.
Limassol's Changing Investment Landscape
Historically, Limassol has been the primary focus for foreign investors in Cyprus. However, with apartment prices in Limassol rising by 8.1% over the past year, many investors are now looking toward smaller towns for commercial development opportunities, driven by the island’s work/travel culture.
Growing Demand for Office Spaces in Limassol
The report notes a steady increase in demand for office spaces, particularly in Limassol. Since 2016, the capital value of office spaces in the city has been on the rise. By the end of 2019, the average office space value in Limassol had reached €2,639 per square meter, representing a significant 42% increase from the end of 2015.
Resilience of the Real Estate Market
Danos & Associates’ report also acknowledges the resilience of the Cypriot real estate market, despite the growing challenges. The report emphasizes the need for government support to sustain the sector’s momentum. Data from the second quarter of 2023 shows a total of 5,974 property transactions, amounting to €1.52 billion. Although the number of transactions is similar to the second quarter of 2022, the value of the properties sold has increased significantly, reaching €1.2 billion.
Regional Market Performance
In the second quarter of 2023, Nicosia and Famagusta were the only provinces to record an increase in property values compared to the first quarter. Nicosia saw a reduction in the volume of transactions to 1,549, but the value of properties sold increased to €299.8 million. Famagusta also saw both an increase in transaction volume and total property value, reaching €59.7 million.
Conversely, Limassol experienced a significant downturn, with property sales values dropping by €200 million compared to the first quarter, reflecting a sharp decline in sales volume. Paphos and Larnaca also showed declines, with Paphos facing a steeper decrease in both value and volume. In Larnaca, despite an increase in transaction volume, the total value of properties sold was slightly lower.
Impact of Policy Changes on the Market
The report points out that the termination of the citizenship by investment program has not negatively impacted the Cypriot real estate market. The housing market continues to grow, driven by strong domestic demand and the return of foreign investors. By the second quarter of 2023, the national housing price index had increased by 7.42% year-on-year, with quarterly growth of 1.46%, even after adjusting for inflation.
This consistent growth underscores the strength of Cyprus’ real estate sector as a crucial contributor to the country’s economic development.
