There is no doubt that the housing market in Cyprus isseriously affected by the global financial crisis and its own banking debtcrisis. The combination of depressed sales and excessive accumulation of supplyled to a sharp drop in real estate prices from 2008 to 2015.
However, the real estate market is cyclical in nature and iscurrently in a recovery stage, where growing demand is slowly absorbingexisting supply. Gradually, this will lead to stabilization, and real estateprices will continue to grow lately at a slow pace.
In the end, the market will reach its long-term averagelevel of employment, where growth will be equal to inflation, and the marketwill move to the next stage. Sales in Cyprus increased significantly - by about29% from 2015 to 2016 and by about 20% from 2016 to 2017. In fact, in 2018 thisfigure fell to a healthy 6%, which indicates that the market will stabilize inthe coming years until it reaches equilibrium.
So, if you look at the last five or six years, the statementthat the real estate market is not synchronized with the basics is incorrect.An assessment of a much shorter period (say, the last six or 12 months) is notindicative and can lead to all sorts of false conclusions.
The statement “bubble” will instantly burst if the CIP(Cyprus Investment Program) scheme ceases” absolutely groundless and based onmarket rumors rather than reliable economic and statistical data.
There is no doubt that the CIP has influenced market growthand will continue to have this impact; but the key factor is how much themarket depends on this scheme.
According to the latest report by KPMG Cyprus Real EstateInsights, in 2018 the number of transactions related to luxury residential realestate sold for more than 1 million euros was just over 500, while the totalnumber of real estate transactions throughout the country over the same periodwas 9,242. This indicates that elite residential complexes - a type of realestate, which is often directly related to the CIP scheme - make up only 5.5%of the total number.
Moreover, historical data (1999–2006) shows that Cyprus hasalways had a strong foreign market, which until 2013 had nothing to do with anyCIP scheme. In addition, a stable number of CIP applications (about 500 eachyear) and the number of transactions of elite residential properties (alsoabout 500 each year) indicate that they are not directly proportional to theincrease in the number of real estate transactions in the country that exceeded9,000 this year.