The Cyprus real estate industry has continued its strong growth in 2023, underlining robust confidence of both Cypriot and foreign property buyers. Sales reached €672 million in the first nine months of the year, with coastal business hub Limassol, followed by Paphos on the west coast taking the lion’s share of contracts.

Cyprus has long been a firm favourite for property buyers worldwide thanks to its high quality of life, safe environment and Mediterranean climate. In addition, the country’s EU membership, its thriving international business centre and strategic position at the crossroads of three continents remain key pull-factors for residential buyers, relocating companies, and investors alike.

Property sales have remained strong in the last year despite rising interest rates. In the first three quarters of 2023 real estate sales in Cyprus rose year on year by a robust 19.9%. While Limassol had the largest absolute number of sales in January-September (3,842), the largest increase was in the up-and-coming coastal town of Larnaca, where sales saw a year-on-year increase of 36.4%.

Sales to Cypriots continue to dominate, accounting for 54% of the total in the first three quarters of 2023. Sales to Cypriots have been driven both by government subsidies, for example, for first-time buyers, but also by steady growth in the household population. However, in terms of growth, sales to non-EU citizens grew most quickly in 2023, rising by 67.6% year on year in the first nine months of 2023, with reports of increasing demand from Lebanon and Israel. In addition, another key force driving the market has been the demand from the numerous ICT companies relocating to Cyprus hunting for office space and readily available units for their employees.

Building Up to Record Growth

Real estate and construction have long been key economic contributors to Cyprus’ economy. Cyprus has one of the highest home ownership rates in Europe and also has a longstanding market for second homes and holiday villas. In particular, the residential market saw a big leap forward in recent years after a period of stagnation. Demand began to rise in 2014 when property sales first picked up following the 2010 peak of the European sovereign debt crisis. In 2019, annual property sales were the highest on record since 2008 with sales rising in all districts. The fast expansion encouraged the sector to significantly upgrade its offering and realise many innovative projects to cater for the needs of global companies setting up on the island and international high-net-worth buyers. Top developers such as Cybarco, Cyfield and Pafilia all left their mark on Cyprus, introducing high-rise apartment towers and top-notch office buildings.

The Cyprus real estate sector was showing strong market performance straight through to 2019, but 2020 marked a turning point as the pandemic hit worldwide. However, 2022 and 2023 have showed dynamic momentum in sales, underlining the strong confidence of both local and foreign buyers in the market. The need to diversify and paying greater attention to the domestic market are seen as ways to sustain activity levels in the sector. While upmarket properties will remain an important element of the island’s real estate strategy, the sector is transitioning to a more holistic vision that also encompasses modern but more affordable units for Cyprus’ increasingly international workforce, eco-friendly and energy-efficient housing as well as building reuse as an alternative to greenfield development.

Increase in Prices

Given the strength of sales and the rising construction prices, it is not surprising that the various residential property price indices point to rising prices, even though the degree of increase differs depending on the index. The index prepared by the Statistical Service, Cystat, which is based on actual sales, reports an increase in prices of 5.9% in the first quarter of 2023 and 3.1% in the second. The Central Bank of Cyprus index, which is based on a larger sample of valuations, reports a year-on-year increase in prices of 7.7% in the first quarter of 2023 and 7.4% in the second. This is the fastest pace of growth since 2008 according to the Central Bank index.

Apartment prices measured by the Central Bank index are clearly rising faster than those of houses. In the second quarter of 2023 they rose by 10.1% compared with an increase of 5.6% for houses in the same quarter. This probably also underlines the importance of the local residential market in property purchases, especially after the withdrawal of the Cyprus Investment Programme in 2020.

The Central Bank index shows a fairly large discrepancy by district, however. While apartment prices in Paphos rose by 16.3% in the second quarter of 2023, thanks to strong sales, apartment prices in Nicosia increased by a more modest 4.2% and in Famagusta by 2.5%.

Landmark Projects

In recent years, Cyprus’ construction industry has been in full swing, with many large-scale developments ensuring a steady stream of new work and upgrading the island’s built-environment, especially in Limassol, Cyprus’ second-largest city. The construction of the Limassol Marina, completed in 2013, was one of the first redevelopment projects that kickstarted the transformation of Cyprus’ real estate sector. It was followed by the construction of several luxury high-rise apartment and office buildings, including Cybarco’s Oval project, the tallest office building in Limassol at 16 floors or 75 metres. Several other luxury projects are currently under construction, including Trilogy and Blue Marina.

The construction and investment in multipurpose projects and mixed-use developments such as luxury marinas and more recent­ly the island’s first-ever and only integrated luxury casino resort, are all part of a wave of new lifestyle and tourism real estate infrastructure. The new casino resort, City of Dreams Mediterranean, has extensive facilities and five-star status. The casino resort is Hong Kong-based Melco’s first expansion outside of Asia and is the biggest casino of its kind in Europe, with the investment of €600 million for this mega project. Spurred by this unique development, Cyprus garnered another landmark investment deal in 2022 with Israeli business magnate Gilad Shabtai investing in over 130,000 m² of land for development surrounding the new integrated casino resort in Limassol. The destination and value of the area are set to be elevated by this key real estate investment.

Proposals include the development of exclusive seven-star facilities providing bespoke services for owners and investors. Plans are also in place for additional investment by the former majority shareholder of telecoms start-up Viber into the further expansion of the area in the future – which is a solid vote of confidence in the vast growth potential of Cyprus.

Following the success of Limassol Marina, more investment has flowed into marina developments on the Cypriot coast. The €300 million luxury Ayia Napa Marina is under con­struction with berthing facilities and a commercial village now fully operational. The marina offers capacity for 600 yachts of up to 60 metres, a shipyard, and a range of luxury villas, apartments and facilities. With significant Egyptian invest­ment backing the innovative project and the seafront residences are expected to be completed by 2023. In addition, the €110 million Paralimni Marina project is set to be completed in 2024, while a tender was signed in August 2021 with Deloitte Ltd and Triton Consulting Engineers SA for a luxury marina in Paphos.

Hospitality and Health Investments

The number of foreign investors closing multimillion-euro deals in the last several years underlines the fact that tourism-related real estate and infrastructure contin­ues to be one of the most attractive investment opportunities in Cyprus. Total sales in 2022 reached more than €4.2 billion. Major investments have been made in the hospitality industry with acquisitions and the construction of new luxury hotels by renowned hotel management chains. The Radisson Hotel Group, one of the largest and most dynamic hotel groups in the world, has big plans to grow its existing portfolio in the country to six hotels and almost 1,000 rooms by 2025, one of which is the Radisson Larnaca Beach Resort, the very first beach resort by the Radisson Hotel Group worldwide.

In 2019, the Luxury Collection, part of Marriott International, opened the Parklane Luxury Collection Resort & Spa in Limassol, marking Marriott International’s entry into Cyprus. In July 2020, Hyatt Hotels Corporation announced a management agreement with Anolia Holdings Limited for the launch of the first Hyatt hotel in Cyprus. The 300-room luxury resort Grand Hyatt Limassol is expected to open in 2025. The new beachfront resort will also be a key element of Zaria Resort, a mixed-use luxury development, comprised of residential apartments and private villas total­ling more than 80,000 m². Israeli conglomerate Fattal Group has also been expanding its portfolio in Cyprus in 2023, and currently manages nine hotel units on the island and has invested more than €300 million in Cyprus' tourism sector. The legendary Berengaria Hotel in the Troodos Mountains is also being restored by bbf Group and Thanos Hotels & Resorts with an investment of €35 million. The completion of the hotel, which will be named Berengaria Luxury Boutique Hotel, is expected in 2026.

Following global trends and faced with an aging population, investing in health and wellness developments as well as rehabilitation and bespoke retirement villages has enormous potential. An early example of this is the Eden Seniors Resort in Larnaca which opened its doors in 2018. Paphos is due to see the first dedicated retirement village in Cyprus. The €16 million retirement village, branded Lazaris Mill, will consist of 82 individual apartments, ranging from studios to larger flats and a small 24-room hotel, and provide bespoke facilities. Another upcoming project in Paphos is Cypress Park, a new luxury residential development turning retirement into a five-star resort stay.

Meanwhile, investors are keeping a keen eye on Larnaca, as it is a city expected to flourish on par with Limassol in the near future. The coastal city, home to one of Cyprus’ two international airports, is already seeing its share of new high-rises and hotels springing up. The city is revealing plenty of investment opportunities with a new marina set to be completed in the next few years and the increasing demand for real estate is supporting the industry to diversify and develop more apartments, houses and office space.

Steering Towards Sustainability 

The resilience of the domestic market is a positive indicator, and it also represents one of the sector’s biggest investment opportunities. The building of homes for first-time buyers and the repurposing of vacant units into more affordable solutions are just two suggestions that are currently being floated in industry circles. There is also demand for senior housing and care facilities. Like many European countries, Cyprus is facing an ageing population. Downsizing and retirement living options could provide the sector with many alternative opportunities, which may equally appeal to international retirees looking for age-appropriate homes in the sun.

Sector analysts also encourage the industry to focus on composite and mixed-use developments that combine the real estate component with other facilities such as retail space, health clinics and recreational areas. These developments are sought-after by employees of foreign firms who prefer comfortable and convenient living spaces but can’t afford the high price tags of luxury apartments or villas.

Brownfield development and urban regeneration initiatives are also full of potential; repurposing old buildings in Cyprus’ larger cities would go a long way towards ensuring they remain vibrant centres of commercial activity while preserving the country’s heritage value. At the same time, there is growing interest in sustainable buildings. Both the construction of new zero-energy buildings, as well as the retrofitting of the existing housing stock with energy-efficient technology, could provide ample work and contract opportunities to the building and construction sector in the years to come.

Future Outlook

Many of Cyprus’ developers are currently rethinking their visions for the future of the island’s built-environment and some are planning to adapt projects from residential to office or hotel accommodation, which they hope will be in greater demand in the next few years. Cyprus has long been a firm favourite for property hunters worldwide thanks to its ideal Mediterranean climate, high quality of life and one of the lowest crime rates in Europe. Top level amenities in combination with the island’s blissful climate, have placed Cyprus rightfully on top of the list of international investors wanting to buy a second home, and maintained the country’s status as a popular investment destination.

Meanwhile, the country’s appeal as a corporate location will ensure that demand for office space and residential units does not dry up. The island has already seen an influx of both companies and talent relocating to the island. Cyprus’ EU membership, its thriving international business centre and strategic position between three continents remain key reasons why companies choose the island for their headquarters or regional office to service clients in the EMEA region. Progressive Cyprus has certainly transformed itself into an increasingly cosmopolitan lifestyle and business location that is supported by efficient infrastructure, which has created a strong foundation that will pay off when the market starts to move again.

For more information, contact Cyprus' investment promotion agency, Invest Cyprus.

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December 2023