Acceleration in house price increases was recorded in 2022, mainly due to increased construction costs.
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The Cyprus Central Bank revealed in their latest Quarterly House Price Index (HPI) report that the increase in house prices accelerated significantly in 2022, primarily due to increased construction costs. Compared to 1.1% growth in the previous quarter, their HPI registered a 1.7% increase for both apartments and houses on a quarterly basis, with a 4.7% increase noted on an annual basis as opposed to 3.2% previously. Most interestingly, all districts are now showing year-on-year increases in both apartment and house prices, signifying a broad market upswing - notable in particular as this is the first time since the pandemic’s start that such an occurrence has been reported. See below the most important influencing factors of today’s Cyprus real estate market.
In conclusion, the real estate sector is recording accelerating growth in house prices as as a result of the increase in construction costs, but also the decline in construction activity. The expected further tightening in the credit market, and the erosion of incomes due to inflation is expected to act as a brake on demand for real estate. Supportive factors are expected to the fact that real estate is considered to be as a safe haven in times of high inflationary expectations.
The real estate sector is experiencing continued growth in house prices, driven largely by escalating construction costs and a decrease in overall construction activity. Despite these positive trends, there are several external factors that could cause this rate of growth to slow. With tighter restrictions around borrowing, coupled with the effects of inflation on individual earnings, there may be a notable reduction in demand for property. However, the fact that real estate is seen as a secure investment amid times of high inflationary pressure may help to offset declines from other areas.
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