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Cyprus Real Estate: Boom or Bust?

Posted by Barbora Fujdova on July 11, 2024

Cyprus Real Estate: Boom or Bust?

Cyprus’ real estate market is experiencing what seems to be a golden age, fueled by a thriving economy, expected to grow by 2.7% in 2024, and a robust tourism sector. Fiscal discipline, with projected budget surpluses averaging 2.3% of GDP from 2023 to 2028, adds to the allure. Coastal cities like Limassol are buzzing with construction activity.


However, this rosy picture masks a dual reality with distinct challenges.


Local Challenges: Despite foreign investments, locals face financial pressures. By February 2024, loan restructuring accounted for 45% of new home loans, highlighting the strain on Cypriot residents. Rising interest rates and soaring property prices, driven by increasing costs of raw materials and energy, exacerbate the situation. Locals, typically earning less and taxed more than foreigners, find it harder to afford homes.


Foreign Investment – A Double-Edged Sword: Non-EU foreign investment, especially in coastal areas like Limassol, Paphos, and Larnaca, drives the market but also introduces risks. Sanctions on traditional investors, like those from Russia, and potential market corrections hint at instability. With about 70,000 Russians and growing numbers of Israeli and Lebanese investors, the occupied north offers a cautionary tale of shifting investor focus.


Overlooking Issues: Historically, Cyprus has often ignored underlying problems, addressing them only in the short term. To ensure long-term stability, the government must tackle affordability issues for locals and reduce dependence on foreign investments. This proactive approach is essential, especially with upcoming elections distracting politicians from these pressing concerns.


Foreigners as Integral Residents: One in four Cyprus residents was born overseas, significantly contributing to society and the economy. They own businesses, enhance cultural diversity, and drive economic growth. However, this also brings challenges like job competition and rising housing demand, which can strain public services and local wages.


Addressing these issues requires inclusive policies and economic planning to ensure fair distribution of benefits from immigration, supporting affordable housing, and equipping locals with necessary skills.


The sustainable future of Cyprus real estate hinges on bridging these divides and fostering shared prosperity for all residents.

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