The Central Bank of Cyprus has warned that house prices must be closely monitored, at least in some of the Mediterranean island’s areas.
The warning came after the House Price Index for the fourth quarter of 2018 indicated that prices in Cyprus continued to record an increase for yet another quarter. However, the price level is still lower than what it was before the financial crisis.
Despite the significant recovery of GDP in Cyprus, real estate prices are rising in moderation with the exception of coastal Limassol where the increase in demand as well as prices is affected by external factors.
These factors include the construction of the marina, the license for the casino resort and the demand for property due to the investment for citizenship scheme.
In the meantime, real estate prices appear to be suppressed by an increased supply due to the sale of properties by asset management companies or banks trying to get rid of non-performing mortgaged loans, the Central Bank noted.
Increased demand for homes and apartments continues to push prices up, but increased supply of real estate from restructurings of non-performing loans holds them down for specific property categories, it added.
Nonetheless, all indicators show that the upward trend in the real estate sector will continue in 2019. In fact, apartment prices throughout Cyprus recorded an increase of 8.7% over the first six months compared to the historically low level of the fourth quarter of 2015.
And house prices recorded an overall increase of 1.6% from the historically low level of the fourth quarter of 2016, but still remain 30% below their highest level. Nicosia, Limassol and Paphos districts have recorded quarterly growth, while Larnaca and Famagusta showed a slight decline.