The hottest topic at the REALTYon conference (REALTYon), held on July 3-4, 2024, in Limassol City of Dreams, centered on the potential bubble in the current Cyprus real estate market.

High interest from foreign investors, the increasing number of properties for sale, and the rising number of building permits across the country raised pivotal questions about the market's current stage. Is there a bubble in the Cyprus real estate market that is poised to burst with negative implications for investors? Or is it a growing and maturing market that might undergo a minor correction before continuing its upward trajectory? Should savvy investors remain active in this market or wait for a potential bubble burst or market correction?

These are indeed million-dollar (or actually million-euro) questions, and many speakers at the REALTYon conference attempted to address these concerns. While the presentations painted a largely positive picture of the current Cyprus real estate market and its future, it's important to take their optimistic projections with a grain of salt. Here, we summarize the discussion around the potential bubble, as debated by speakers and guests.

Indicators of a Possible Bubble:

  1. Increasing number of properties for sale each month.
  2. Rising number of sales at reduced prices.
  3. Falling resale property prices.
  4. Increased prices for sales due to high foreign investor activity.

Indicators That There Is No Bubble:

  1. High and growing rental rates, indicating sustained demand.
  2. Most property buyers are homeowners, not investors, suggesting a stable need for housing.
  3. Lack of affordable loans in Cyprus; high interest rates and complex mortgage processes for foreigners mean most buyers are paying in cash.
  4. Solid and resilient rental yields in most areas of Cyprus.

Key Points from Speakers:

  1. Real estate markets will always experience fluctuations, and savvy investors should be prepared for this.
  2. Market stages are defined by supply and demand balance. When one is out of balance, it corrects itself by impacting the other and, consequently, prices.
  3. Markets go through various stages during their lifecycle: increasing supply due to high demand; oversupply needing absorption; low supply, and rising demand due to population or workforce growth.
  4. The Cyprus rental market is expected to correct itself, and the current oversupply will allow for this.
  5. You will never know if the market is in a bubble until it actually bursts.

Investment Considerations:

  • Flipping Properties: If the goal is to flip properties based on appreciation in a couple of years, it's advisable not to assume high appreciation in the current market, given the trend of increasing inflation across Europe.
  • Generating Cash Flow: Cyprus remains one of the optimal places in Europe to produce high rental yields, especially in its central cities. With its growing population and job opportunities in tourism, high-tech, and education sectors, the demand for rentals should remain strong, even if it stagnates temporarily.
  • Permanent Residency: For those seeking permanent residency and a "window" to Europe, Cyprus offers an attractive opportunity with one of the lowest entry points (€300k) for residency by investment programs. However, be prepared for bureaucratic hurdles and a potentially slow process to obtain an EU passport.

Conclusion:

As with any investment, it's crucial to assess your risks, conduct thorough research, and be prepared to take calculated risks if the numbers work in your favor.