In the final quarter of 2024, Cyprus’s residential property market exhibited unmistakable signs of cooling. According to data compiled by the Central Bank of Cyprus (CBC) in partnership with local banking institutions, two principal factors—soaring construction expenses and elevated borrowing costs—played a crucial role in tempering both transaction volumes and price appreciation across the island.
During Q4, the general House Price Index (HPI) rose by a modest 0.4 percent, a notable decline from the 0.9 percent increase recorded in the third quarter. This deceleration was reflected across the major segments of the market. Traditional detached and semi-detached houses maintained slightly stronger momentum, yet even this segment saw its quarterly growth soften significantly compared with earlier in the year. Meanwhile, apartment values scarcely budged, with only a 0.1 percent increase over the three-month period.
When viewed on an annual basis, the pace of growth also eased markedly. Overall house prices increased by 4.5 percent year-on-year, down from the 6.5 percent gain logged in Q3. Apartment prices registered a 5.5 percent rise compared to the same quarter in 2023, while standalone homes appreciated by 4.6 percent.
Apartment values—historically more sensitive to changes in market sentiment—experienced a clear slowdown in Q4. The combination of rising supply levels in urban centres and more cautious buyer behaviour in response to higher financing costs restrained apartment price growth to its lowest quarterly rate in over a year. Detached and semi-detached houses, although performing better than apartments during this period, nonetheless saw their quarterly growth rate halve compared with mid-year levels, illustrating how the broader market dynamics spared no segment.
In its quarterly real estate bulletin, the CBC underscored that the continued volatility of construction-material prices and the persistence of above-average borrowing rates were significant inhibitors to market activity. Developers faced increased budgets as the cost of steel, cement and other key inputs remained elevated, prompting many to delay or re-scale planned projects. At the same time, mortgage rates, which have climbed steadily over the past five years, constrained buyer affordability and acted as a brake on new transactions.
These headwinds coincided with weaker sales momentum, leading to a gradual build-up of listings available for sale or rent. Industry surveys, including the European Commission’s December 2024 Economic Survey, echoed this cautious sentiment: expectations for property price increases over the subsequent three months were notably subdued among market participants.
Among Cyprus’s six districts, Paphos emerged as the clear outperformer in Q4, posting a remarkable 13.4 percent year-on-year increase in house prices—the highest rate in the country. The Paphos apartment market also delivered strong results, registering a double-digit annual rise of 12.1 percent, although this represented a slight deceleration from earlier quarters.
By contrast, Nicosia bucked the national growth trend, recording the only negative performance with a 0.4 percent decline in average house prices compared to Q4 2023. The capital’s apartment sector was marginally more resilient, managing a modest 2.6 percent annual increase, yet still trailing behind other urban markets.
Limassol and Famagusta saw their annual house price growth slow to 5.1 percent and 7.8 percent, respectively, while Larnaca maintained a steady 6.1 percent increase. In the apartment segment, Famagusta led with a 14.2 percent rise, followed by Larnaca’s 8.7 percent gain. Limassol’s apartments climbed 5.5 percent, while Nicosia remained at the lower end of the spectrum with its 2.6 percent uptick.
The interplay between high input costs and tighter financing conditions suggests that near-term price gains are likely to stay subdued. As sales volumes soften, prospective buyers may find themselves with a broader selection of available properties, potentially enhancing their negotiating leverage. On the supply side, developers may continue to postpone new construction until material prices stabilize and borrowing costs ease.
Looking ahead, stakeholders will be monitoring movements in global commodity markets and domestic interest-rate trends. Any significant moderation in construction-material expenses or meaningful reduction in borrowing rates could reinvigorate both demand and supply, setting the stage for a more robust recovery. Conversely, further cost escalations or interest-rate hikes could extend the market’s current slowdown well into 2025.
Text based on materials from cyprus-mail.com, photo pixabay.com
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