The real estate market in Cyprus experienced a significant upswing during the initial quarter of 2023, with prices demonstrating continuous growth, particularly in the apartment sector. This upward trajectory can be attributed primarily to a surge in demand.

Recent data released by the Central Bank of Cyprus on Tuesday indicates a substantial acceleration in the Residential Property Price Index (RPPI) compared to previous quarters.

The indicators pertaining to property sales and demand in the first quarter of 2023 corroborate this surge in housing demand. Figures sourced from the Department of Land and Surveys reveal a noteworthy year-on-year increase in demand for residential properties.

Notably, foreign buyers have contributed significantly to this growth, accounting for the most substantial annual increase during the review period. They comprised roughly half of all buyers in both 2022 and the first quarter of 2023.

Interestingly, the rate of escalation in construction costs seems to be stabilizing in contrast to the notable growth rates observed during the 2021-2022 period.

In the districts of Limassol and Larnaca, the annual increase in the RPPI is displaying an accelerated trend, while in the Paphos district, despite a deceleration in growth, the percentage increase in residential property prices remains considerable.

Even with the rise in key interest rates by the European Central Bank (ECB) and the subsequent reduction in demand for housing loans in the initial quarter of 2023, the domestic demand for properties appears to have been minimally impacted, as it continues to exhibit growth.

The RPPI for both houses and apartments in the first quarter of 2023 witnessed a quarterly rise of 2.1%, surpassing the 1.6% increase observed in the preceding quarter. This growth is driven by a 2.3% increase in apartment prices and a 1.7% increase in house prices compared to the previous quarter.

Furthermore, on an annual basis, there is a robust surge in residential property prices, registering a 7.7% increase in the first quarter of 2023, in contrast to the 6.6% rise in the fourth quarter of 2022. Apartment prices during the same period experienced an annual growth of 8.4%, while house prices saw an increase of 6.6%.

Throughout the first quarter of 2023, residential property prices demonstrated quarterly growth across all districts. Specifically, Nicosia observed a 1.3% increase, Limassol 2.9%, Larnaca 2.6%, Paphos 0.3%, and Famagusta 2.3%.

Regarding annual changes in property price indices by district, all districts recorded increases for the sixth consecutive quarter. Specifically, Nicosia's property prices rose by 4.3%, Limassol by 10.6%, Larnaca by 7.7%, Paphos by 6.8%, and Famagusta by 4%.

Examining house prices on a quarterly basis, increases were evident in all districts except Paphos. Notably, Nicosia's house prices grew by 1.3%, Limassol by 2.8%, Larnaca by 2.2%, and Famagusta by 2.9%, while Paphos experienced a decline of 1.1%. On an annual basis, house prices displayed growth across all districts. Specifically, house prices in Nicosia, Limassol, Larnaca, Paphos, and Famagusta increased by 4.2%, 9.4%, 5.8%, 5.7%, and 5%, respectively.

For apartment prices on a quarterly basis, an increase was evident across all districts. Particularly, Nicosia's apartment prices rose by 1.4%, Limassol by 2.4%, Larnaca by 3.5%, Paphos by 4.3%, and Famagusta by 1.2%. On an annual basis, apartment prices exhibited growth across all districts for the seventh consecutive quarter. In the first quarter of 2023, Nicosia's apartment prices increased by 4.4%, Limassol by 10.4%, Larnaca by 12.3%, Paphos by 10.3%, and Famagusta by 2.4%, compared to the corresponding quarter in 2022.

Moreover, recent data from the Department of Land and Surveys (DLS) highlights a continuous 18.8% annual increase in the number of property sales documents, reaching 3,574 sales in comparison to 3,009 during the same period last year. This underscores the heightened demand for properties.

In the examined quarter, there was a substantial 33.6% annual increase in the number of properties sold to foreign buyers (1,706 compared to 1,277), primarily originating from non-EU countries. Furthermore, the number of properties sold to domestic buyers also rose by 7.9% annually (1,868 compared to 1,732).

This surge in sales documents to foreign buyers can be largely attributed to the "headquartering policy," which attracts foreign professionals from countries such as Russia, Israel, Ukraine, the United Kingdom, Lebanon, and Belarus.

The limited availability of new properties is reflected in the production index for constructions (building category) published by the Statistical Service of Cyprus. After experiencing six consecutive quarters of annual decline, this index demonstrated a 5.5% increase in the first quarter of 2023.