LIMASSOL AT THE FOREFRONT
The rocketing property prices in Cyprus are one of the biggest problems that young Cypriots are currently facing, particularly in the increasingly cosmopolitan city of Limassol. Whilst there seems to be a high demand for both sales and rentals all over the island, Limassol in particular seems to be at the forefront of sharp increases, leading to several economists issuing a series of stark warnings. The implications of this disparity for residents and potential investors, compared to other areas in Cyprus, exist all over the city and its suburbs, creating a market that is distinctly more challenging for all economic sectors. The implications of these trends extend beyond just real estate, and they largely influence local communities and the economy at large.
A FOCAL POINT
Limassol has become a focal point for high property prices and rocketing rents that have seen a constant rise over the past decade. This phenomenon is not only reshaping the real estate landscape but is also influencing the broader economic and social fabric of the city. Limassol’s high prices also present a series of multifaceted issues that are influencing its economic growth, tourism, foreign investment, and lifestyle amenities. Leading economists have stated that affluent foreign investors are fuelling the main surge in property prices and rents in Limassol, bringing an economic imbalance to the city. The result is that these inflated prices are not being set against the economic principle of basic supply and demand, creating a vacuum that will once again create another false economy in the city.Â
LOW SALARIES & HIGH RENTS
As Limassol continues to grow, finding a balance that accommodates all demographics, while fostering sustainable development, has been critical in preserving the quality of life for its residents. This unfortunately is now found to be wanting and the economic situation in Limassol has adversely affected those at the beginning of their professional careers. Young professionals starting their first jobs, often with low initial salaries are increasingly choosing to continue to live in their parent’s homes to minimise their costs. Others are now sharing occupancy and rental costs, as they are finding that one-bedroom apartments in Limassol, far exceed their starting salaries.
CASH BUYERS
Most affluent foreign investors, who are now dictating the market, are cash buyers and have ultimately helped to widen the inequality gap between themselves and normal working-class residents. Those seeking financial support from conventional banks are also suffering as a result and are often finding themselves outbid for properties. This is supported by a recent study that has found that otherwise menial workers on a minimum wage are beginning to shun Limassol and are moving on to other parts of the island, to make their living, creating a shortfall in the workforce within the city.Â
Factors Driving High Property Prices in Limassol
Several interrelated factors contribute to the high property prices and rental costs in Limassol.
1. General Economic Growth: Limassol has established itself as a commercial hub, attracting both local and international businesses. The establishment of various international companies, particularly in the finance and shipping sectors, has prompted an influx of professionals. This economic growth has fostered demand for housing, pushing property prices upward.
2. Tourism: As well as a commercial hub, Limassol is also a major tourist destination known for its beautiful beaches, cultural events, and vibrant nightlife. The city’s tourism has increased demand for short-term rental properties, such as apartments and holiday homes, further driving up property prices. This is particularly evident in areas along Limassol’s seafront, where properties are marketed to tourists and expatriates willing to pay a premium.
3. Foreign Investment: The Cyprus government has implemented favourable policies to attract foreign investment. The ‘Golden Passport’ scheme grants citizenship to those investing in real estate, and this along with other such schemes has resulted in a significant influx of foreign buyers and investors, particularly from other parts of Europe, Russia, and the Middle East. This has intensified competition for properties, leading to escalating prices.
4. Limited Supply of Land: Demand in the city has outstripped supply and this is another factor why prices have soared and developers have increasingly targeted high-end projects. This has created an imbalance in luxury properties that cater to affluent buyers, further inflating the average price point in the market.
5. Infrastructure Development: Ongoing improvements in urban infrastructure and the city’s lifestyle amenities have heightened its attractiveness. The development of quality schools, hospitals, and recreational facilities, along with a well-maintained seafront promenade, has made Limassol a desirable location to live and work, creating an increased demand that has pushed prices further up.
Comparisons with Other Regions
In contrast to Limassol’s escalating property market, other cities in Cyprus exhibit markedly different trends.
1. Nicosia: The capital city of Cyprus features a more balanced property market. While it has experienced some price increases, they are not as pronounced as in Limassol. Factors such as economic centrality and a diverse job market play a role, but Nicosia has not seen the influx of foreign investment and tourism that Limassol generally enjoys. Additionally, the availability of land and properties tends to be higher, allowing for relatively lower prices and more options for potential buyers.
2. Larnaca: Known for its historical significance and its international airport, Larnaca has also been subject to rising property prices, but these increases have been gradual and more manageable than in Limassol. The seaside city’s charm attracts both expatriates and locals, yet the overall demand has not reached Limassol’s intense levels. Rental properties in Larnaca, particularly in the suburbs and those away from the tourist hotspots, remain significantly cheaper than those in Limassol.
3. Paphos: this city has seen a steady increase in property prices, primarily due to its appeal to both retirees and holidaymakers. However, it offers a mix of affordable properties that draw residents seeking less expensive alternatives to Limassol. The competition is less fierce, prompting more attainable prices across various property types.
4. Ayia Napa and Protaras: These popular tourist resorts have maintained lower costs of living and property prices than Limassol. Unlike Limassol, they cater mostly to tourism, and the seasonal economic nature of these areas keeps prices more stable, while Limassol’s consistent demand from year-round residents contributes to its high prices. Â
Comparisons with Other Regions
In contrast to Limassol’s escalating property market, other cities in Cyprus exhibit markedly different trends.
1. Accessibility Issues: High property prices often result in accessibility challenges for residents, particularly young professionals and families. Many are pushed out of the market or forced to rent properties in less desirable areas, which increases commuting times and reduces their quality of life.
2. Economic Disparities: The concentration of wealth in Limassol can exacerbate economic inequalities across Cyprus. While the city thrives, other regions might not benefit equally from the rapid economic growth seen in Limassol, leading to regional imbalances and potential social unrest.
3. Impact on Local Businesses: As rental prices rise, local businesses may struggle to attract customers. If residents are compelled to relocate to more affordable areas, spending power in Limassol may decrease, affecting service-based economies reliant on local patrons.
4. Investment Opportunities: While high property prices can attract investment, they can also deter potential buyers and investors looking for more feasible options elsewhere on the island. This dynamic might ultimately stall broader economic growth despite the current boom in Limassol.
THE MEDIAN ANNUAL INCOME IN CYPRUS 2023
DATA SUPPLIED BY CyStat
According to data from the Cyprus Statistical Service, CyStat the median annual income in Cyprus ranged from €14,156 to €18,873 in 2023.
The following is a breakdown of income classes:
28% of the island’s population falls into the ‘Low Income’ bracket, typically earning less than €14,155 annually. Of these, 13.9% are at risk of poverty, with an income of just €11,324 or lower.
21.9% of the island’s population falls into the ‘Lower Middle Class’, bracket typically earning between €14,156 and €18,873.
30.3% of the island’s population falls into the ‘Middle Class’, bracket typically earning between €18,874 and €28,309.
11.9% of the island’s population falls into the ‘Upper Middle Class’ typically earning between €28,310 and €37,746.
7.9% of the island’s population falls into the ’High Income Class’, typically earning above €37,747
