Russian investors have finally changed their priorities in the Cyprus real estate market in 2024

Russians have changed their attitude towards real estate in Cyprus — since 2022, the focus is not so much on investment prospects as on the possibility of obtaining a residence permit and further relocation to the island.

In the first quarter of 2024, the number of applications for the purchase of Cypriot real estate increased by 20.5%, but the share of this area from the total demand for foreign real estate decreased by 9.27%. Tranio experts attribute the cooling of demand to the reorientation of investors inside Cyprus.

The content of the article

1. Almost 60% of buyers of Cypriot real estate in the 1st quarter of 2024 associate investments with the possibility of moving
   1. Dynamics of demand for real estate from relocators: external factors
2. The permanent residence program is the main driver of Russian demand for real estate in Cyprus in 2024
3. The increased interest in real estate in Cyprus coincides with the trend towards an increase in the number of companies and startups
   1. A tailwind for the office real estate market

Almost 60% of buyers of Cypriot real estate in the 1st quarter of 2024 associate investments with the possibility of moving

The purpose of buying investors from Russia has changed dramatically: now Cyprus is one of the main regions where real estate is becoming a tool for obtaining permanent residence.

The turning point was the second quarter of 2022: before that, since 2015, Cyprus had been one of the main destinations for the purchase of resort real estate – an average of 61% of investors on the island planned to buy a “cottage” for seasonal holidays.

Dynamics of demand for real estate from relocators: external factors

The purpose of buying real estate in Cyprus among Russians, the share of all applications

The dynamics of foreign demand for real estate in Cyprus correlates with the change in the proportion of applications for relocation and obtaining a residence permit.

The Cyprus permanent residence program also determines the average investment budget on the island: in the first quarter of 2024, investors try not to depart from the threshold of 300 thousand euros and on average lay 350 thousand euros for the purchase of real estate, while in Limassol budgets are slightly higher than Paphos, another popular investment destination — 400 thousand against 375 thousand euros, respectively.

The total share of foreign buyers of real estate in Cyprus has consistently grown from 27% in 2013 to a peak of 47% in 2018, then began to decline during the pandemic and after the abolition of citizenship by investment. Since 2022, there has been a gradual return to the pre—pandemic level – the share of foreigners among home buyers in the last two years has been 44%.

In 2023, foreigners purchased 6,900 properties — 16% more than in 2022 and 87% more than in 2021. The largest number of transactions was made in Paphos and Limassol (34% of the total number of transactions each) and in Larnaca (21%).

In 2024, these regions are still in the greatest demand from foreign investors and Russians in particular: in the first quarter of 2024, 29% of Tranio’s clients considered buying real estate in Limassol, and 32% in Pathos.

The increased interest in real estate in Cyprus coincides with the trend towards an increase in the number of companies and startups

A startup cluster has been formed in Cyprus, numbering 846 fast-growing companies with a total value of over 32.5 billion euros as of 2023.

The number of employees in the high-tech sector has been growing rapidly since the end of 2021, reaching 56.2 thousand people by November last year.

Limassol became the epicenter of the Cypriot startup boom – it was this city that attracted the main stream of potential Russian—speaking property buyers during the peak demand for relocation in the second and fourth quarters of 2022.

According to data for 2023, 310 startups with 18.5 thousand employees were based here.

Limassol offers its residents a more dynamic and diverse community for comfortable IT migration, development of the software and high-tech sector. In addition, the commercial real estate infrastructure is much more developed here: 61% of new offices in Cyprus are located in Limassol, followed by Nicosia with 26%. There are practically no new offices in the rest of the districts.

If the trend towards an increase in the number of startups can still be called a niche event in the IT sector, then the growth in the total number of companies registered on the island only reinforces the thesis about the attractiveness of Cyprus for business.

During the pandemic, the Cypriot economy experienced the natural shocks inherent in all countries with a significant share of tourism revenues in the economy, which reflected a sharp decrease in the number of companies in the republic by 11% at once. A year later, the rate of decline slowed to 5%, and a year later, state programs to attract foreign companies gave their fruits — now this sector of the economy showed growth of 4% in 2023 and maintained its pace of development in 2024. In the first quarter of 2024, there were more than 201 thousand companies here.

A tailwind for the office real estate market

In 2021, the development of office real estate in Cyprus has almost completely stopped. The reason for this was uncertainty about the future demand for office space after the COVID-19 pandemic and the spread of remote operation.

However, by the end of the same year 2021 — the beginning of 2022, the market situation had changed dramatically. The island has faced a sharp increase in demand for high-quality offices from international companies that have massively relocated their activities to Cyprus. This has created a significant imbalance between the supply and demand of office space.

In 2022, against the background of the continued surge in demand, in the absence of sufficient supply, rental rates for office space increased significantly. In Limassol, they reached 20-40 euros per m2, and in Nicosia — 12-22 euros per m2.

Currently, the average return on investment in office real estate in Cyprus is 5.5–5.7% per annum.

Average profitability of real estate in Cyprus