Real Estate Market in decline in Cyprus, but numbers are not bad
The consulting firm Deloitte's serious work allows us to find relevant information on the real estate market's current situation in Cyprus. The market is declining. The pandemic had a significant impact in this and other areas. In any case, we are optimistic: many indicators allow us to glimpse an excellent future for the market in the coming years.
According to the European Commission, between 2013 and 2019, the indicator of confidence in the construction of Cyprus showed a great improvement. It is true that the pandemic greatly affected this situation. In the first ten months of 2020, a decrease in the confidence indicator was observed.
What is the confidence indicator? It is a statistical indicator based on the results of different commercial surveys on the construction industry's situation and expectations about real estate developments in the future. It arises from the arithmetic mean of the balances (taken in percentage points) of the order book's answers and job expectations. As the indicator increases, we obtain as data the sector's positive expectations in the short term.
Data available through October 2020 showed a decline in confidence to a negative 12%, compared to a negative 5% in 2019. Seen in a pandemic context, the numbers are not that bad.
Building permits indeed reached their lowest level. As of the date of Deloitte's report, CySTAT provided data through November 2020. During the first 11 months of 2020, the number of building permits was 6,375.
As a consequence of the contraction in the building permits issued, the total area of building permits in square meters also decreased. Something that we had already seen between 2010 and 2014. In that period, the average area per building permit decreased from 332 square meters to 159 m2, reaching the lowest point. What matters is the growth that occurred from then until 2019: construction licenses increased to 125.2%, reaching an average of 358 m2.
These data show the intention to continue developing real estate projects in Cyprus in a widely favorable context for those who want to make profitable and quality investments. And this is where the following data is worth mentioning: during the first 11 months of 2020, the average area per building permit decreased to just 329 square meters, reducing 8.2% compared to the end of 2019.
Concerning construction materials, the Cyprus Statistical Service (CySTAT) showed a decrease of 0.5% in 2020, compared to 2019. This data is relevant: it means that investors continued with their works in addition to collecting construction material. We dare to say that these types of contractions are very favorable for the future.
It should be noted that the Department of Lands and Surveys (DLS) registered, with 3,767 sales, the lowest number of contracts for the 2010-2020 segment. During 2019, the highest number was recorded at 10,366, exhibiting a CAGR, since 2013, of 18.4%. All of this suggests strong demand during the 2013-2019 period. In 2020, the total sales contract number was considerably low (7,968) compared to 2019. This was due to COVID-19 and the lockdown imposed in March 2020. The expected recovery time and rate are still unknown, but we are optimistic and believe it will be better than last year.