Property prices rise despite fall in citizenship applications

Prices of residential properties continued to climb during the second quarter of 2019, despite a dip in demand for high-end properties from foreign buyers as a result of tightened eligibility criteria in the citizenship-by-investment scheme, the Central Bank of Cyprus (CBC) said.

In its Residential Property Price Index bulletin for Q2 2019, the CBC said year-on-year apartment prices increased by 4.3%, houses by 2.3%.

The CBC identified two reasons why flats were becoming costlier at a faster rate than houses were.

First the rising demand up until the reporting period was driven by foreign nationals seeking Cypriot citizenship or permanent residence, with a spike in bills of sale recorded in the second quarter of the year.

And secondly, there is an insufficient stock of residential apartment units sought by growing numbers of students (local and foreign) as well as foreign workers.

Year-on-year, flat prices rose the most in Larnaca (9.4%) and Limassol (7.2%), followed by Famagusta (5.3%), Paphos (2.2%) and Nicosia (1.9%).

The Central Bank said it is apparent that, unlike the other districts, the market for apartments in the capital is driven primarily by internal demand.

For houses, the greatest price hikes were observed in Limassol (4.5%), then Paphos (1.8%), Nicosia (1.7%), Famagusta (1.3%) and Larnaca (1.2%).

Foreign nationals can obtain a Cypriot passport if they invest a minimum of €2.5 million in local real estate and other assets. In addition, foreigners can acquire permanent residency by investing at least €300,000 in property.

The CBC bulletin does note that, since tougher criteria were introduced for the citizenship-by-investment programme in May 2019, there has been a drop in demand for properties.

However, the CBC said, the impact of the citizenship-by-investment scheme on the property price index is not clear-cut.

This is down to two reasons: purchases of luxury properties are for the most part not financed by the local banking system; and the majority of these high-end properties are treated as outliers and thus excluded from the sample taken to construct the property index.

In compiling its residential property price index, the CBC utilises data provided by commercial banks. The price indices are based on property valuations received by banks for the purpose of granting housing loans.

Source: Cyprus Mail