According to official government figures, apartment prices have been rising in recent months. Why are apartment prices growing faster than home prices?
The rise in apartment prices is a huge concern, particularly for young couples.
To discover answers, we must investigate this issue thoroughly, concentrating on the true causes of the significant increase in pricing.
The latest Central Bank of Cyprus (CBC) study on the home price index, as well as publications that seek to analyze some parts of the problem, identify just a few of the possible solutions, such as monitoring the continually rising worldwide prices of construction materials.
However, probably the most essential, though frequently overlooked, element contributing to price increases is a limited availability of eligible homes. For years, apartment supply has been lower than demand, and this condition is unlikely to change very soon. On the contrary, it is reasonable to predict that supply will continue to fall over the next three to four years as developers postpone new projects.
The market tends to right itself in the long term. This, however, necessitates the presence of favorable circumstances.
And it is at this point that a low degree of governmental involvement might be used to rectify any distortions.
Consider Limassol, where rents have soared in recent years. Furthermore, because the CBC prefers to compare price growth rates with the average GDP growth rate of the Cyprus economy, it is worth noting that rent prices have outperformed the country's GDP growth rate during the previous five years.
In the long term, the market will remedy this distortion. However, considering the market's modest size, it may take four to five years to attain the targeted level of rental pricing. Tenants will continue to be victimized by paying excessive rents until that time comes. That is why the government must act until the market stabilizes rents. It is worth noting that rent prices have surpassed the country's GDP growth rate over the previous five years.