Cyprus – The Momentum Builds - 14th November -

Cyprus – The Momentum Builds

Regular readers of these posts will be familiar with our view that Cyprus is one of the hottest property markets in Europe.

The potential, which we highlighted in our Cyprus Investor Report at the beginning of the year, is due to several factors not least attractive property prices, a strong and robust economy, further improvements to the strength and liquidity of the local banking sector, significant inward investment in infrastructure, a strong currency and an attractive passport and residency by investment scheme.

Fundamental to all of this is that Cyprus has a great product. It is a beautiful island; the so-called jewel of the Mediterranean, has a superb climate, first-class infrastructure as well as a very safe and friendly place to live. It is also in an advantageously strategic location at the junction of Europe, Asia and Africa.

Nothing during 2017 has tempered the view that now is a great time to invest. Local agents and developers have all voiced comments that activity is significantly ahead of 2016 – over 100% in some cases. This is reflected in the recent publication by the Government Department of Land and Surveys which shows that overall sales are up nearly 30% for 2017 for the year to end of October as compared to the same period in 2016. Limassol (+41%), Paphos (+40%) and Famagusta (+27%) were the leading regions.

The Momentum Builds

To demonstrate the momentum building in the Cypriot property market, we’ve taken a rolling three-month average of sales from March 2013 to the last set of results for October 2017. March 2013 shows the average of sales in January, February and March of 2013.

Since 2013, sales have been steadily increasing which is shown on the following graph. However, what we at Escape to the Sun like to understand is whether momentum is building? What we mean by momentum is whether not just sales are just growing but are they accelerating?

The upward sloping trend line indeed shows sales are picking up in pace. Over the period, sales have been increasing at a rate of 7.5 sales per month ie the sales for the next month are expected to be 7.5 higher than the prior month.

Sales to October 2017

Where is the Strongest Momentum?

So, the graph begs the question, where in Cyprus is the sales growth building fastest? The graph below shows the trend lines for the three strongest regions; Limassol, Paphos and Famagusta.

 

Regional Sales to October 2017

You can see that the region with the strongest momentum is Limassol followed by Paphos and then Famagusta. In fact, over the period, sales volumes in Limassol have been increasing at an average rate of 3.4 per month ie the number of sales for the next month can be 3.4 higher than the previous month. The corresponding increases for Paphos and Famagusta is 1.6 and 0.5 per month respectively.

Limassol is powering ahead. In 2012, the area generated 26% of the total island property sales. So far in 2017, this proportion has increased to 37%.

Context – The Lost Decade

To understand what this means in terms of property price growth, you first need to appreciate a little of the history of what has happened to the market over the last ten years.

Prices hit a peak in 2007/2008 but following the financial crisis, property values crashed and the market was further undermined by exposure to the Greek banking crisis in 2012/2013. Since then, prices stabilised for a few years and momentum really started to build in 2016. At this point, it was possible to buy the same property at the same price as in 2006 – the lost decade.

During this period to 2016, stock had built-up and property developers either moved out of the market or deferred projects.

Over the last 18 months, the increase in demand has had a limited impact on prices because of this stock overhang.  However, this excess capacity is rapidly being run down and with a shortage of property being developed, demand will start to exceed supply. Once this occurs, we can expect a real acceleration in prices. Our view is that we are rapidly approaching this tipping point.

From a property investment perspective, Cyprus has a very appealing attribute in that there is a very defined amount of land. This is further limited in that there are planning restrictions that further restrict the amount of land available for development such as planning permission, building density, proximity to roads and utilities.

In practice, what this means is that minor variations in demand can have a disproportionate impact on price.

Prevaricate at your Peril

If you are thinking of buying into the Cyprus property market, then our view is that time is now of the essence. Taking a ‘wait-and-see’ approach will very likely result in the market having moved on during the interim.

If you are thinking of buying a property in Cyprus, or if you would like to understand which areas within Limassol, Paphos and Famagusta have the strongest momentum, then please get in touch.

 

 

Please note that this news item does not constitute investment advice or financial planning. Escape to the Sun always recommends that you seek relevant financial and legal advice from appropriately regulated firms. 

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