A reminder of what the role of government is when it comes to housing and to providing access to education and healthcare.
“Governments establish policies to address housing affordability, offer financial assistance for housing, and support the construction of low-cost homes. In education, governments fund public schools and universities, making education accessible to all, and provide financial aid for students. Additionally, they implement healthcare systems or programs to offer affordable medical services and insurance for citizens. By focusing on these essential aspects, governments promote equal opportunities and improve the overall well-being of their people, fostering a more equitable and prosperous society.”
There is no reference to enriching the professional classes, real estate developers, or construction companies.
With that in mind, lets look at the residential real estate market. The rising interest rates are dampening the mortgage market’s spirits, and yet, the demand for residential property investment continues to defy gravity. It seems external factors are ruling the roost, while the good old fundamentals have taken a backseat.
The major external factors influencing the real estate demand in Cyprus are three-fold. First, the post-Ukraine war migration, bringing approximately 30,000 highly skilled individuals to Cyprus. Second, the economic downturn in Lebanon is pushing Lebanese families and businesses towards our sunny shores. And third, the political instability in Israel is leading families and companies to seek stability in Cyprus. These newcomers have caused a stir in the residential property market, especially in Limassol, Larnaca, and Paphos.
These new demand drivers are shaking up the market norms. Increasing rental values and the high values of properties are attracting capital, making us hopeful that the supply of real estate will increase to accommodate the demand. But the rising property prices are creating a struggle for locals, whose salaries can’t keep pace. Although some are benefiting from the capital inflow, there’s an undeniable burden on those less fortunate.
Unfortunately the main problem with what is happening isn’t going to be the lack of affordability, but gentrification. This term describes a process where a previously low-income neighbourhood is transformed by the influx of affluent individuals, leading to an increase in property values and cost of living, which can displace the original, often less-privileged inhabitants. The provision of services can also be affected. For example, shops, restaurants, and other services that catered to the original population might get replaced by high-end establishments targeting the new, wealthier residents, e.g. Ladies Mile beach restaurants, private schools, etc.
What should the government do in this context? A strict and transparent regulatory framework is crucial. But sadly, government intervention seems limited, and any long-term planning appears remote. We expect the government’s focus to remain on superficial issues, while significant problems such as underutilized and untaxed properties, low urban density, and unaddressed social security matters are ignored.
Now, let’s talk about Ask Wire! We’ve made great strides with our three amazing tools: Real Estate Dynamics (RED), Risks and Hazards, and the Lead Generation. Subscriber numbers in Cyprus for Real Estate Dynamics (RED) and the Lead Generation platform have been booming (we have added a systemic bank, a loan servicer, the Cyprus government’s tax office, real estate developers, estate agents, etc), and we’re planning to expand our reach from September.
We’ve now launched Real Estate Dynamics (RED) in Greece, mapping around 650,000 transactions and listings. It’s a place we know and love, as the management team was working there in 2014 and 2015. Given the growth in the local real estate market, the appreciation of technology and data, and companies’ willingness to automate processes, we’re excited about this venture. The Risks and Hazards and the Lead Generation tool should become available by end September.
In August, expect some exciting news about our growth plans, not only in Cyprus and Greece but also in Romania. Stay tuned.