first half in review | h1 2020 cyprus real estate market · 2020. 11. 20. · h1 2020 - the key...

Cyprus Real Estate Market B

Cyprus Real Estate Market

First Half in Review | H1 2020

November 2020

2 PwC Cyprus

Foreword 3

Sale Contracts statistics 26

Cyprus Economy update 10

Foreign transaction activity

30

Construction Activity

PwC in Cyprus 43

H1 2020 – The Key Highlights 4

6

28

42

Transaction Volumes / Investment Activity levels 20

High-end residential property segment (≥€1,5mln)

36

PwC Real Estate Advisory Services

1

2

3

4

5

7

8

9

10

11

6

Contents

Redefining the Real Estate Market: The Day After

Cyprus Real Estate Market 3

Foreword

We are delighted to present our latest PwC Cyprus Real Estate Market publication. This publication, which comes in an unprecedented period for Cyprus and the global economy, as a result of the COVID-19 pandemic, provides insights about the behaviour of the Cyprus economy in general following the spread of the virus, and presents key real estate market developments, focusing on the performance of the sector during the 1st half of 2020 (H1 2020).

In addition to the adverse effect of the pandemic on the real estate market, the suspension of the Cyprus Investment Programme (“CIP”), effective from 1 November 2020, is presenting a new challenge for the market and the industry in general. The developments have prompted an urgency to pursue a much needed sector reform and for the market participants to set new priorities and strategies. Recognising that going back to the old-normal is not a viable option, in this publication we present some thoughts / recommendations as regards possible transformational changes and provide options as regards new strategies and priorities.

We are determined to stand by you during these very challenging times. At PwC, we have a diverse team of professionals with backgrounds ranging from engineers, management consultants, property valuers, planning experts, data analysts, finance experts, and merger and acquisition specialists. Combined with our strong international network, we are able to offer solutions in support of our clients’ needs, assisting in the transformation of the sector and helping so that the real estate industry and, in turn, the economy can go back to their normal operating rhythm.

Evgenios C EvgeniouCEOPwC Cyprus

2H1 2020 - The Key Highlights

Real GDP % IMF Forecasts(6,4%) - 2020(F)

Unemployment8,0% - Sep 2020

Cyprus exhibited strong economic growth for the fifth year in a row in 2019 (3,2%). However, following the global outbreak of COVID-19, real GDP is expected to contract by 6,4% by the end of 2020 and assuming a gradual recovery materialises in the coming months, the economy is projected to turnaround in 2021.

Despite the expectation for sharp increases in unemployment rates, Cyprus unemployment remained relatively stable until H1 2020 (7,4% by June 2020), mainly attributed to the introduction of Government policy measures to safeguard jobs. Unemployment rate reached 8,0% by September 2020 and, according to IMF forecasts, it will remain stable until the end of 2020 (EU average: 8,9%).

In April 2020, the Cyprus Government issued a 30-Year and 7-Year bond, raising a total of €1,75bn (total bids €2,6bn), proving that despite uncertainty, international markets continued to place confidence on the Cypriot economy. Since 2018, key international credit rating agencies (with the exception of Moody’s) maintained Cyprus’ sovereign rating to investment grade, although Fitch changed the outlook of Cyprus from positive to stable in April 2020.

Drop in new mortgage loan facilities largely relates to the impact of theCOVID-19 pandemic and more specifically the lockdown and restriction measures which were in place from March to May 2020. A 4-year subsidy of interest rates (up to 1,5%) for new housing loans (up to €300.000) was introduced by the Cyprus Government in order to boost demand for new mortgages.

The sector’s contribution to the Cyprus economy continues to grow (4% during 12 months to 30 June 2020), highlighting the importance of the sector in the overall economy. The latest developments as regards the CIP suspension and the disruptive nature of the pandemic, imply a broader economic uncertainty in the short to medium term.

Lending market%

4 PwC Cyprus

In April 2020, Cyprus Government raised €1,75bn through issue of new bonds

New mortgages decrease by (18%) during H1 2020 and introduction of interest rate subsidy

4%Growth in the GVA contribution of the Real Estate & Construction sector (12M to 30 June 2020)


• Mainly attributed to the unusually high influx of transactions from foreigners during Jan-May 2019 and the adverse effects from the spread of the pandemic in 2020, which exacerbated the prevailing reduced levels of activity

• Pre-Lockdown months (Jan-Feb): Activity levels in terms of transaction volume were similar to the respective months of 2019, while transaction value dropped by c.21%

• Lockdown months (Mar-May): Physical and travelling restrictions to execute transactions almost entirely wiped out any new transaction executions from foreigners

• Perhaps the most badly hit segment during H1 2020

• 51 high-end residential properties acquired recording a 78% drop compared to H1 2019

• Given that the high-end residential property segment is almost directly linked to the CIP, its suspension creates uncertainty with regards to the future of this segment and highlights the need to re-focus and transform the real estate market

• The value of transactions for apartments and houses reached €828mln during H1 2020 (3.500 units transacted)

• Land transactions reached €257mln, mainly comprising land within residential planning zones (55% of total land value)

44% drop in foreign transaction activity

• Even before the pandemic, transactions appeared reduced compared to the first months of 2019

• During lockdown, the inability of foreign buyers to travel to Cyprus exacerbated the prevailing reduced levels of activity

€1,2bn transaction value (55% drop compared to H1 2019)

Transactions of high-end residential properties (≥€1,5mln) plummeted by 78% during H1 2020

69% of transaction value relates to residential properties

Double digit drops in transaction value across all districts

35% drop in value of new building permits issued

• Coastal districts of Limassol and Paphos (predominantly driven by foreign demand), decreased by 65% and 61% respectively compared to H1 2019

• Nicosia (predominantly driven by local demand), experienced the lowest hit (31% drop)

• Limassol continues to absorb the majority of transactions (33% of total transaction value)

• Number of building permits dropped by 7% during H1 2020 (-35% in value terms)

• The drop observed may be attributed to the lockdown measures, which inevitably affected the private and public sector procedures required to issue permits

• Largest concentration of new permits relate to Nicosia (33%), closely followed by Limassol

3Redefining the Real Estate Market: The Day After

6 PwC Cyprus

The COVID-19 pandemic, and the disruption it has brought to the economy, as well as the suspension of the CIP, prompted an urgency to pursue a more radical transformation of the sector, and for the industry participants to revisit their strategies and priorities. It is inevitable that there is a need to consider differentiated concepts and products that are sustainable and fit for the future.

This section briefly outlines various recommendations which could be considered in assisting this transformation and re-focus of the market, recognising that given the prevailing conditions and developments, going back to the old-normal is not a viable option.

According to the latest Eurostat data, Cyprus demonstrates one of the lowest fertility rates across the EU and a relatively high life expectancy (82,9 years on average). As a consequence, based on the latest EU forecasts, by 2070, one in three Cypriot residents is expected to be 65+ years old, while at the same time by 2070, 10% of the country’s population is expected to be >80 years old.

Demographic shifts are expected to shape the housing market and pose enormous challenges to the country’s healthcare system in the years to come. A significant portion of the elderly population ends up living alone or in couples in their three/four-bedroom family homes where they have raised their families. These houses tend to be large in size (47% larger compared to the EU average), difficult to maintain and do not have the amenities to support their daily needs.

The ageing demographics of Cyprus pose the need to develop housing products which are tailored to the needs of the elderly. The adoption of planning incentives to encourage the development of specialised Elderly Housing and Assisted Living communities and the introduction of tax incentives to attract specialised operators are expected to induce private sector initiatives in this direction. At the same time, such investments could lead to potential savings in the public healthcare system and could even create opportunities for cross-service investments such as rehabilitation centres and medical tourism projects.

Follow the demographics: Housing for the elderly


Composite real estate projects have a multiplier positive impact on the economy and can support sustainable growth. Therefore, incentives should be provided for the development of composite projects, in line with the demographic and other demand factors, that have a multiplier impact on the economy. Such projects could include among others, affordable living, education and student housing etc. These projects should include, in addition to the real estate component, other uses and facilities such as retail space, health centres, recreation areas etc which will help other sectors of the economy, having in this way a multiplier positive impact on employment and the economy at large.

Incentives for such projects could take the form of additional building density, tax incentives both for the investors and the buyers/users, relaxations etc. Projects that fall in this category should also have a priority in terms of licencing given the multiplier effect that these projects could have on employment and the economy. Finally, similar incentives should also be provided for projects that are friendly to the environment and promote the sustainable development of the country.

Focus on concepts with economic multiplier effect: Composite real estate projects

Incentivise Adaptive Reuse of Buildings / Repurposing of old buildingsOur city centres are crowded with buildings which are commercially and occupationally obsolete. At the same time, there is increasing demand for space, resulting in an urban sprawl. Developing our cities inwards is a strategy that would allow town centres to remain vibrant without the need of additional infrastructure and further significant investments. This can be achieved by repurposing existing buildings away from uses now seen as increasingly obsolete and therefore less profitable, towards real estate that fits the way people use buildings today.

The trend towards repurposing existing buildings has been a key topic of the latest PwC Surveys (Emerging Trends in Real Estate Europe) with major institutional investors citing that repurposing of assets has become not only viable but a highly sought-after option for many investors. In particular, on the basis of the PwC Survey findings, over the coming 5 years, repurposing assets from one sector to another is on the agenda for nearly 75% of institutional investors across Europe. It is also expected that in the prevailing volatile market, it will be critical for investors going forward, to ensure that the assets they invest in, can be repositioned and repurposed.

Government schemes could be considered that would incentivise the repurposing of existing buildings, to address the ever changing needs of occupiers and rejuvenate city centres.

Housing affordability has been an evolving issue over the years, and it is expected that it will deteriorate if it is not tackled effectively. The need for greater investment in social infrastructure, such as affordable housing, across Europe, was highlighted in the latest PwC Survey (Emerging Trends in Real Estate Europe 2021), with the COVID-19 pandemic exacerbating this issue further.

Based on Cyprus published statistics, c.70% of the Cypriot housing stock is owner-occupied, a large proportion of which is subject to a mortgage or loan. The debt burden of such households reaches almost €3,5bn. Even though the ESTIA scheme could limit part of the problem, households defaulting against their housing loans are not declining. The introduction of an effective housing policy is considered critical. Policy measures in this framework should induce developments and housing projects for lower income tiers of the society. Such policies could be scaled to different locations across the island, tailored to their demographic characteristics. Using examples of alternative housing policies that exist in different parts of the world, such measures could include setting rents in housing schemes that are lower than average rents in the local area (i.e. capping rents as a percentage of the market rent, regulated by the local authorities), property downsizing (i.e. developing housing units which are smaller than the minimum threshold size, stipulated by the town planning regulations), rent-to-buy schemes, repurposing of vacant properties into affordable housing concepts or even relaxation of planning and development regulations.

Looking at the UK case study, any new residential development is required, under Section 106, to dedicate a minimum number of units of the overall development as affordable housing units in different forms, such as affordable rented and shared ownership (i.e. co-ownership with local authorities).

According to the European Commission, c.75% of the EU building stock is energy inefficient and in order to meet the EU climate and energy objectives, the current rates of renovations should at least double. In dealing with this issue, the EU is investing heavily in grants or loans that help push technology and best practice in the sector and also supports and finances energy efficiency projects through the European Investment Bank (EIB). In addition, to boost building renovation, the European Commission has announced its intention to launch the new ‘renovation wave’ initiative, as part of the European Green Deal with the aim to increase the rate of renovation of existing buildings by developing financing possibilities, promoting investments in buildings and pooling renovation efforts. Like all Member States, Cyprus will receive an allocation of Green Deal funding through regional development mechanisms and existing EU programmes.

At the same time, increasingly more investors realise that social and environmental factors have an impact on the value of a real estate property and there is growing interest in energy efficient and sustainable buildings. In fact, the trend towards energy efficiency and the sustainability of buildings is a key topic in the latest PwC Survey (Emerging Trends in Real Estate Europe 2021), whereby nearly 8 out of 10 survey respondents think that energy efficiency, carbon emissions and climate adaption will increase in importance in their portfolios in 2021, and the number is higher still over a five-year horizon. When it comes to impact investing, cutting the carbon footprint of real estate is regarded as by far the most effective measure for the industry to make a difference.

In order to tackle the issue of energy inefficient buildings and enhance impact investments in Cyprus, economic and other forms of incentives, could be provided to property owners, developers, individuals and other organisations. These incentives and mandates could relate to the use of land for energy production, tax incentives on capital expenditure involving energy efficiency in building construction and renovation, solar energy generation from government building roofs or along motorways, or even a green building density incentive programme and an expedited planning permission scheme.

Affordable housing

Sustainability in the built environment

8 PwC Cyprus


The real estate market has a lot to benefit from digitalisation initiatives. For example, currently executing a transaction of immovable property at the Land Registry is a time-consuming and cumbersome procedure. There is a high administrative burden and inefficiencies involved when dealing with the various Local Authorities and Land Registry functions, as regards settlement of municipal charges, granting of tax clearances, payment of transfer fees etc. The COVID-19 outbreak and the restrictions imposed, further highlighted the need for consolidation and digitalisation of these procedures.

Digitalisation would simplify the transaction process and reduce costs for all participants. At the same time, it would also enhance transparency, making the Cyprus property market even more appealing for foreign investors. Digitalised and more efficient processes would slim down operating costs for financial institutions and servicers, reducing the burden of the management and handling of large real estate and loan portfolios.

Implementation of a centralised Leasehold Registry, through which landlords will be required to register lease agreements of privately owned residential and commercial properties in Cyprus and to update such information on an annual basis. This would complement the sound Land Registry system, providing elevated transparency not only in terms of the registered ownership of immovable property, but also in terms of the use and occupancy. Maintaining transparency is increasingly important for the real estate market, a sector which continues to attract a growing allocation of capital from foreign investors. The proposed mandatory registration process would also serve to alleviate tax evasion on rental flows, primarily in the private housing sector.

Accelerate digitalisation and digital transformation of real estate procedures

Implementation of a centralised Leasehold Registry


2,1% 1,9%

(0,7%)

0,0%

1,7% 2,5% 2,1%

3,0% 2,3%

1,7%

(7,6%)

2,0% 0,4%

(3,4%)

(6,6%)

(1,9%)

3,4%

6,7%

4,4% 4,1% 3,2%

(6,4%)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(F)

European Union Cyprus

10 PwC Cyprus

Contraction of the Cyprus economy during 2020, followed by an anticipated recovery in 2021 depending on the pandemic and the adverse effect on the local and global economy.

Cyprus exhibited strong GDP growth for the fifth year in a row in 2019 (3,2%) maintaining its position as one of the fastest growing economies in the EU.

However, the global outbreak of COVID-19 has completely changed the picture, with the Cyprus economy heading into a profound recession in 2020. The adoption of travel restrictions, lockdown measures and the interruption of all non-essential businesses since mid-March 2020, had a major impact on the Cypriot economy. According to latest IMF forecasts, real GDP is expected to contract by -6,4% bythe end of 2020 (compared to -7,6% being the forecasted EU average). Even though the speed and rate of the economy recovery remains highly uncertain,assuming a gradual recovery materialises in the coming months, the economy is projected to turnaround in 2021, with IMF estimates indicating a recovery.

(6,4%)

+3,2%

2020 (F) Real GDP %

2019 Real GDP %

4Cyprus Economy update

Cyprus Vs European Union Real GDP (% change)

*Note: The 2020 real GDP % forecast represents the latest available IMF estimatesSource: IMF (World Economic World Outlook Database – October 2020)

IMFForecast


2020 (Forecast) GDP % (constant prices)Lithuania IrelandPolandFinlandBulgariaDenmarkSwedenRomaniaEstoniaNetherlandsLuxembourgGermanyLatvia HungaryCyprusCzech RepublicSloveniaAustriaSlovak Republic European Union (27)MaltaBelgiumCroatiaGreece FranceUnited Kingdom PortugalItalySpain

(1,8)(3,0)(3,6)(4,0)(4,0)(4,5)(4,7)(4,8)(5,2)(5,4)(5,8)(6,0)(6,0)(6,1)(6,4)(6,5)(6,7)(6,7)(7,1)(7,6)(7,9)(8,3)(9,0)(9,5)(9,8)(9,8)(10,0)(10,6)(12,8)

2019 (Actual) GDP % (constant prices)IrelandEstoniaHungaryMaltaPolandRomaniaLithuaniaBulgariaCyprusCroatiaSlovenia Slovak RepublicDenmarkCzech RepublicLuxemburgLatviaPortugalSpainGreeceEuropean Union (27)NetherlandsAustriaFranceUnited Kingdom BelgiumSwedenFinlandGermanyItaly

5,95,04,94,94,14,13,93,43,22,92,42,42,32,32,32,22,22,01,91,71,71,61,51,51,41,31,10,60,3

Source: IMF (World Economic World Outlook Database – October 2020)

12 PwC Cyprus

Despite the expectation for sharp increases in unemployment rates as a result of the effects of the COVID-19 pandemic, Cyprus unemployment remained relatively stable until H1 2020 (7,4% by June 2020). This was mainly attributed to the introduction of Government policy measures which aimed to safeguard jobs, mitigate unemployment hikes and protect the most vulnerable groups of society. The real effects of the recession became more evident by September 2020 with the unemployment rate reaching 8,0% (which is still below the forecasted Euro Area average of 8,3%).

Depending on the spread of the pandemic, there is uncertainty regarding the unemployment rate from 2021 onwards.

Unemployment rate in Cyprus (2010 - September 2020)

Source: IMF (World Economic World Outlook Database – October 2020), Monthly data September 2020: Eurostat*The September rate represents the seasonally adjusted rate, estimated by Eurostat** Euro Area relates to the 19 countries using the Euro as they national currency

IMF Forecast

6,3%

7,9%

11,9%

15,9% 16,1% 15,0%

13,0%

11,1%

8,4%

7,1% 8,0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sept-20*

Unemployment rate in Cyprus (2010 - September 2020)

2014 - September 2020 drop: 810bps

8,0%

8,9%

2020Cyprus Euro Area**

Unemployment

8,0%

14 PwC Cyprus

Since 2018, key international credit rating agencies (with the exception of Moody’s) maintained Cyprus’ sovereign rating to investment grade.

Although Moody’s was the only rating agency that maintained a below investment grade rating for the country (Ba2), in September 2019, it changed the outlook of Cyprus’ rating from stable to positive.

On 3 April 2020, following the COVID-19 outbreak, Fitch changed the outlook from positive to stable in order to account for the effects of the pandemic, but maintained the country’s investment grade on the expectation of a relatively strong economic recovery in 2021. In September 2020, S&P affirmed Cyprus’ rating of BBB- with a stable outlook, despite the fact that the economy is in the midst of the pandemic’s negative effects.

Source: Trading Economics, PwC Research

Cyprus’ sovereign rating

03.04.2020

0,0%0,5%1,0%1,5%2,0%2,5%3,0%3,5%4,0%4,5%

Cyprus Government Bond Yields (%) (2018-2019)

10-Year Government Bond (issued Oct 2015) 10-Year Government Bond (issued Sep 2018)15-Year Government Bond (issued Feb 2019) 30-Year Government Bond (issued May 2019)7-Year Government Bond (issued April 2020)


Yields of 10-Year Government bonds (which were priced at 4,03% at issued date, October 2015) have fallen to 0,25% by the end of 2019 (with c. 6 years remaining to the expiration of the bond).

During the first months of 2020, Cypriot sovereign bond yields remained stable before they started experiencing some volatility in early spring, in line with other European bonds, demonstrating early signs of the pandemic. In April 2020, the Government of Cyprus issued a 30-Year and a 7-Year bond, raising a total of €1,75bn (€0,5bn and €1,25bn respectively), to cover financing needs created by the fiscal impact of the COVID-19 pandemic. Total bids for the aforementioned bonds reached €2,6bn proving that despite the prevailing uncertainty, international markets continued to place confidence on the Cypriot economy.

By the end of April 2020, sovereign bond yields peaked with yields of 10 and 15-year bonds reaching c.2,1% and c.2,3% respectively. Following the announcement of the European Central Bank intervention (18 March 2020) regarding the Pandemic Emergency Purchase Programme, yields eased during the following months, reaching c.0,9% and c.1,2% for the 10 and 15-year bonds respectively, by June 2020.

Cyprus Government bonds

Cyprus Government Bond Yields (%) (2015 - June 2020)

Cyprus Government Bond Yields of new bonds issued during 2020 (%)

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

30/01/2020 29/02/2020 31/03/2020 30/04/2020 31/05/2020 30/06/2020

20-Year Government Bond (issued Jan 2020) 10-Year Government Bond (issued Jan 2020)

30-Year Government Bond (issued April 2020) 7-Year Government Bond (issued April 2020)

Bond20-Year Government Bond (issued January 2020) 1,371%

10-Year Government Bond (issued January 2020) 0,915%

30-Year Government Bond (issued April 2020) 1,750%

7-Year Government Bond (issued April 2020) 0,690%

Mid-yield (%) as at 30 June 2020

Source: Bloomberg

0,0%0,5%1,0%1,5%2,0%2,5%3,0%3,5%4,0%4,5%

Cyprus Government Bond Yields (%) (2018-2019)

10-Year Government Bond (issued Oct 2015) 10-Year Government Bond (issued Sep 2018)15-Year Government Bond (issued Feb 2019) 30-Year Government Bond (issued May 2019)7-Year Government Bond (issued April 2020)

16 PwC Cyprus

€18,9

€19,6€20,2

€19,4

€18,4

€16,9 €16,9€17,2

€17,6

€19,3

4,99% 5,05% 5,16% 5,15% 4,73%

3,71% 3,36% 3,16%

2,87% 2,39%

2,17%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H12020

Household disposable income & mortgage interest rates

Mean equivalised disposable income (€'000s) Mortgage interest rates

-ve

outlo

ok

Source: Central Bank of Cyprus and CystatNote 1: The equivalised disposable income is the total disposable income of a household, divided by its respective equivalised sizeNote 2: The mortgage interest rates correspond to the average rates of greater than 5 years in terms of housing loans

Key drivers of the housing market: Household disposable income, mortgage interest rates and access to financing

Increased employment combined with a low inflation environment during the past years, led to an increase in the real disposable income of households in 2019 (9,7% increase). Although data on real disposable income has not been made available for 2020, according to the European Commission report (dated Spring 2020), private consumption is expected to decline by more than the GDP anticipated contraction (i.e. -6,4%) with the shock cushioned somewhat by the support by the Government to households and, to a smaller extent, by the expected increase in domestic tourism.

At the same time, interest rates on housing loans continue to decline. By 30 June 2020, mortgage interest rates dropped to 2,17% (recording a c.22 bps drop compared to 31 December 2019).

Household disposable income & mortgage interest rates

-ve

outlo

ok

2,17%


Lending Market

Source: Central Bank of Cyprus

New mortgage loan facilities experienced a drop to €395mln during H1 2020, compared to €481mln during H1 2019 (c.17,9% drop) demonstrating that flows of additional credit for housing purchases remain low. This drop largely relates to the impact of the COVID-19 pandemic and more specifically the lockdown and restriction measures which were in place from March to May 2020. In the short to medium term, banks are keen on granting new loans to viable borrowers; however, it is expected that they will remain extra cautious given the uncertainty around the medium-term repayment capabilities resulting from reduced revenues and net worth. At the same time, the 4-year subsidy of interest rates (up to 1,5%) for new housing loans (up to €300.000) was introduced by the Cyprus Government, in order to boost demand for new mortgages.

€0€500

€1.000€1.500€2.000€2.500€3.000€3.500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H12020

New mortgage loan facilities (€/mln)

€481 €395

H1 2019 H1 2020

H1 2020 Vs H1 201918%New mortgage loan facilities (€/mln)

€0

€500

€1.000

€1.500

€2.000

€2.500

€3.000

€3.500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020

New mortgage loan facilities (€/mln)

18 PwC Cyprus

Public admin, defence,

education & healthcare 20%

Real estate & construction 17%

Financial, professional & administrative services 19%

Tourism, trade & transport 24%

Other sectors21%

Gross Value Added (GVA) contribution by sector (12 month period to 30 June 2020)

Real Estate - One of the main pillars of the Cyprus economy

The Real Estate and Construction sector traditionally constitutes one of the key pillars of the Cyprus economy. The Real Estate and Construction sector constituted 17% of the country’s GVA during the 12 month period to 30 June 2020.

Until the first half of 2019, the Real Estate and Construction sector experienced a rapid growth, reaching 11% growth in GVA during the 12 months to 30 June 2019. Although this growth decelerated amid the pandemic, the sector’s contribution to GVA experienced a 4% growth during 12 months to 30 June 2020 and remained the fastest growing sector, highlighting the importance of the sector in the overall economy. Taking into consideration the latest developments as regards the CIP suspension and the disruptive nature of the pandemic, there is broader economic uncertainty in the short term.

Source: Cystat

Source: Cystat

Gross Value Added (GVA) contribution by sector (12 month period to 30 June 2020)

% Growth in GVA of key sectors for the 12 month period to 30 June 2020

4% 3%

(0%)

(7%)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Real estate &construction

Public admin,defence,

education &healthcare

Financial,professional &administrative

services

Tourism, trade &transport

18 PwC Cyprus

20 PwC Cyprus

5 Transaction Volumes / Investment Activity levels

The growth in real estate transaction activity observed over the past years was reversed in the first half of 2020. The total volume and value of properties transacted in Cyprus through the DLS (both in terms of contracts of sale and sale transfers) recorded a significant drop during H1 2020 compared to H1 2019, mainly attributed to the following:

1. During January to May 2019, the market experienced an influx of transactions from foreign buyers mainly arising from the anticipation of the revisions in the CIP investment criteria (which were effected from June 2019 onwards).

2. The spread of the pandemic, which resulted in businesses and individuals deferring significant investments in the face of physical restrictions and increased economic uncertainty, exacerbating the prevailing reduced levels of activity, observed in H1 2020.

Specifically, the total number of properties transacted during H1 2020 reached 5.600, compared to 8.800 in H1 2019, representing a 36% decrease. In transaction value terms, an even sharper drop was observed, with total transactions reaching €1,2bn during H1 2020, indicating a drop of 55% (H1 2019: €2,7bn).

Source: The transaction activity analysis was based on data from the Department of Lands and Surveys (DLS) relating to contracts of sales and sale transfers, extracted on 2/10/2020. Any differences with previous publications relate to amended Land Registry records and discrepancies between the date of agreement and respective filing date.Note: The above figures do not include: (i) Debt for Asset Swap transactions (DFAS), (ii) transaction of real estate through the sale of company shares or fund units (Share Deals) and (iii) any other transactions not filed or adequately recorded at the DLS

Cyprus Real Estate sector at a glance

H1 2019 H1 2020% increase / decrease

No. of properties transacted

Transaction value (€bn)

8.800 5,600

2,7 1,2

(36%)

(55%)

€ 1,1bn

€ 1,7bn € 1,9bn

€ 3,4bn

€ 4,5bn € 4,2bn € 4,4bn

€ 1,2bn

5.900 7.100

8.100

12.000

15.500 15.800 17.100

5.600

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

2013 2014 2015 2016 2017 2018 2019 H1 2020

€bn

valu

e of

pro

perti

es tr

ansa

cted

Transaction value (€bn) No. of properties transacted

H1

2019

H1

2020


(90%)(85%)(80%)(75%)(70%)(65%)(60%)(55%)(50%)(45%)(40%)(35%)(30%)(25%)(20%)(15%)(10%)

(5%)0%5%

Jan Feb Mar Apr May June

Transaction value (% change) Transaction volume (% change)


A. Pre-lockdown (Jan - Feb) Activity levels in terms of transaction volume were relatively in line with the respective months in 2019. However, in terms of transaction value, a drop of c.21% was observed.

B. Lockdown (March - May) Cyprus had a very strict lockdown from March to May 2020, with very limited ability of people to move and commute (airports were closed, people had to stay at home etc.). Apart from the physical restrictions to execute transactions, the travelling restrictions imposed, almost entirely wiped out any new transaction executions from foreigners.

C. Post lockdown (June) Activity levels in terms of transaction volume were relatively in line with the same month in 2019 (5% decrease in June 2020), while in terms of transaction value a 16% drop was observed during June 2020.

Month on month % growth

Month on month % growth

Source: The analysis was based on data from the Department of Lands and Surveys (DLS) relating to contracts of sales and sale transfers, extracted on 02/10/2020Note: The above figures do not include: (i) Debt for Asset Swap transactions (DFAS), (ii) transaction of real estate through the sale of company shares or fund units (Share Deals) and (iii) any other transactions not filed or adequately recorded at the DLS

(4%) 4% (46%) (82%) (59%) (5%)

1.192 1.322

1.466 1.694

1.837

1.295 1.140

1.377

795

307

756

1.232

0

500

1.000

1.500

2.000


# pr

oper

ties

trans

acte

d

H1 2019 H1 2020

(21%) (22%) (58%) (87%) (75%) (16%)

C. Post-Lockdown(June)

B. Lockdown(March-May)

A. Pre-Lockdown (January-February)

Throughout H1 2020, transaction value experienced a more acute drop when compared to the number of transactions, demonstrating that units transacted were on average of a lower value.

327 408

463

643 590

250 258 317

193

81147

211

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0


€mln

val

ue o

f pro

perti

es tr

ansa

cted

H1 2019 H1 2020

25%

33%

15%

6%

21%

€

22 PwC Cyprus

All districts experienced double-digit drops in the volume and value of properties transacted during H1 2020. The coastal districts of Cyprus such as Limassol and Paphos which are markets predominantly driven by the foreign segment, demonstrated a decrease in transaction value terms of 65% and 61% respectively compared to H1 2019.

Nicosia district, which is a market predominantly driven by the local segment, experienced the lowest hit during H1 2020, in transaction value terms (31% drop compared to H1 2019).

Despite the fact that Limassol experienced the biggest hit in terms of transaction activity, it continues to absorb the majority of transactions in the sector, representing 33% of transaction value and 26% in terms of number of properties sold during H1 2020.

Nicosia made up 31% of total number of transactions recorded, although in terms of value it comprises 25%, reflecting that on average transactions are of a lower value compared to Limassol.

Paphos ranked third in terms of transaction value during the first half of 2020, with 21% of the total share of the market.

Source: Department of Lands and Surveys (DLS), PwC Analysis

% Change in volume and value of properties transacted per district (H1 2019 Vs H1 2020)

Transaction volume and value by district (H1 2020)


31%

26%

19%

6%

17%

Nicosia Limassol Larnaca Famagusta Paphos

#

(19%)

(48%)

(31%)(26%)

(47%)

(31%)

(65%)

(36%)

(56%)(61%)(70%)

(60%)

(50%)

(40%)

(30%)

(20%)

(10%)

0%


% Change in volume and value of properties transacted per district (H1 2019 Vs H1 2020)

Transaction volume (% change) Transaction value (% change)

Transaction value (€mln) H1 2019 H1 2020Nicosia 434 300

Limassol 1.143 401

Larnaca 280 178

Famagusta 161 71

Paphos 664 257Total 2.681 1.206

31%

26%

19%

7%

17%


#

-

100

200

300

400

500

600

700

Valu

e (€

/mln

)

Transaction value per month (2019 - H1 2020)

-

100

200

300

400

500

600

700

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Valu

e (€

/mln

)


Residential Commercial & Other Land

During the first half of 2020, the transaction value of the residential property sector reached €828mln, representing an overall decrease of 60% compared to H1 2019. In total 3.500 residential units were transacted (2.200 apartments and 1.300 houses), demonstrating an overall decrease of 42%, implying that the units transacted were on average of a lower value compared to H1 2019. The residential property sector made up 69% of the total value of transactions in the sector during H1 2020 (apartments: 37%, houses: 32%), compared to a 77% contribution during H1 2019.

• Following the revision of the CIP criteria (which took place in May 2019) and until the period of lockdown (March 2020), the average monthly transaction value amounted to €285mln, representing a 41% decrease compared to the 2019 period preceding the revision of CIP criteria.

• During lockdown months (March-May 2020), the average transaction value was significantly reduced to €140mln.

• In the midst of lockdown months, April 2020 was the month with the lowest transaction value records across all asset classes.


Transaction value by type



37%

32%

6%

21%

4%

Apartments HousesCommercial LandOther


25%

33%

15%

6%

21%

€

Average monthly transaction value before revision of CIP criteria

Average monthly transaction value pre-lockdown and post revision of CIP criteria of May 2019

Average monthly transaction value during lockdown

Revision of CIP criteria

€486mln €285mln €140mln

Apartments Houses

H1 2019 H1 2020 % increase / decrease

Transaction value (€bn) €1,2bn €0,4bn (67%)

No. of properties transacted 4.100 2.200 (46%)


Median €101k €104k 3%


Median (€0-€500k) €100k €103k 3%





Median €197k €189k (4%)


Median (€0-€500k) €175k €170k (3%)

24 PwC Cyprus

1.052

40

6

4

1.969

88

29

21

- 500 1.000 1.500 2.000 2.500

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020

Apartments sold per price bucket Houses sold per price bucket

485

165

45

14

739

286

91

60

- 100 200 300 400 500 600 700 800

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020

Note: In order to avoid statistical discrepancies, the above analysis includes only single unit transactions with 100% share. Accordingly, the number of transactions in the chart differ from the table above as the chart excludes the aforementioned categories.



Apartments Houses





Median €101k €104k 3%

Average €141k €124k (12%)


Median (€0-€500k) €100k €103k 3%

Average (€0-€500k) €116k €114k (2%)





Median €197k €189k (4%)

Average €310k €248k (20%)


Median (€0-€500k) €175k €170k (3%)

Average (€0-€500k) €194k €186k (4%)

24 PwC Cyprus

1.052

40

6

4

1.969

88

29

21

- 500 1.000 1.500 2.000 2.500

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020


485

165

45

14

739

286

91

60

- 100 200 300 400 500 600 700 800

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020




Apartments Houses





Median €101k €104k 3%


Median (€0-€500k) €100k €103k 3%





Median €197k €189k (4%)


Median (€0-€500k) €175k €170k (3%)

24 PwC Cyprus

1.052

40

6

4

1.969

88

29

21

- 500 1.000 1.500 2.000 2.500

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020


485

165

45

14

739

286

91

60

- 100 200 300 400 500 600 700 800

0-250k

250k-500k

500k-1mln

>1mln


H1 2019 H1 2020

Note: The number of transactions included in the price bucket chart differ from the total transactions presented in the table above, as the chart includes only single unit transactions with 100% share (to avoid statistical discrepancies).

Note: The number of transactions included in the price bucket chart differ from the total transactions presented in the table above, as the chart includes only single unit transactions with 100% share (to avoid statistical discrepancies).


Land transactions during H1 2020 reached €257mln, corresponding to 21% of transaction value of the sector.

55% of the total value of land transactions relate to land within residential planning zones, whereas 14% comprised land within agricultural planning zones. In value terms, land transactions recorded a 35% drop compared to H1 2019.

Land transactions by planning zone


14%

55%

17%

6% 7,7%

0,3%

Agricultural Residential

Commercial & Special Zones Industrial

Tourist Other / Non-Identified

€47% 46%

2% 3% 1% 1%

Agricultural ResidentialCommercial & Special Zones IndustrialTourist Other / Non-Identified

#47% 46%

2% 3% 1% 1%

Agricultural ResidentialCommercial & Special Zones IndustrialTourist Other / Non-Identified

#

Fields Plots



No. of properties transacted 1.200 1.200 0%



No. of properties transacted 900 600 (33%)


14%

55%

17%

6% 7,7%

0,3%

Agricultural Residential

Commercial & Special Zones Industrial

Tourist Other / Non-Identified

18% 25%

36%

29%

14%

17%

7%

7%

25%

22%

-

1.000

2.000

3.000

4.000

5.000

6.000

H1 2019 H1 2020


30% 26% 24%

19% 17% 15% 15% 17% 17%

19% 25%

26%

30% 26%

28% 31% 32%

35%

36% 37%

34%

29%

16%

14%

17%

16% 18%

22%

19%

15% 15%

15%

17%

10%

10%

9%

6%

7% 7%

6%

7% 7%

6%

7%

19%

19%

24%

31%

27% 25%

25%

24% 24%

25%

22%

-

2.000

4.000

6.000

8.000

10.000

12.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020

No. of contracts of sale filed at the DLS per district (2010 - H1 2020)


26 PwC Cyprus

6Sale Contracts statistics

The reduced transaction activity in the market is also evident by the number of sale contracts recorded at the DLS during H1 2020, which reached 3.272, representing a 41% drop compared to H1 2019.

5.560

3.272

(41%)H1 2020Drop in no. of sale contracts filed at the DLS (H1 2020 Vs H1 2019)

No. of real estate contracts of sale (H1 2019 vs H1 2020)


Source: Department of Lands and Surveys (DLS)


30% 26% 24%

19% 17% 15% 15% 17% 17%

19% 25%

26%

30% 26%

28% 31% 32%

35%

36% 37%

34%

29%

16%

14%

17%

16% 18%

22%

19%

15% 15%

15%

17%

10%

10%

9%

6%

7% 7%

6%

7% 7%

6%

7%

19%

19%

24%

31%

27% 25%

25%

24% 24%

25%

22%

-

2.000

4.000

6.000

8.000

10.000

12.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020



30% 26% 24%

19% 17% 15% 15% 17% 17%

19% 25%

26%

30% 26%

28% 31% 32%

35%

36% 37%

34%

29%

16%

14%

17%

16% 18%

22%

19%

15% 15%

15%

17%

10%

10%

9%

6%

7% 7%

6%

7% 7%

6%

7%

19%

19%

24%

31%

27% 25%

25%

24% 24%

25%

22%

-

2.000

4.000

6.000

8.000

10.000

12.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020



3.272

8.598

7.0186.269

3.7674.527

4.952

7.063

8.7349.242

10.366

Peak of Cyprioteconomic crisis

Growth of 2,75x

26%

NicosiaThe image part with relationship ID rId8 was not found in the file.

Paphos

Limassol

Famagusta

Larnaca

Nicosia

1.013

1.987

772 372

1.416

830 934 563

232

713

-

500

1.000

1.500

2.000

2.500


% Growth in no. of real estate sale contracts per district (H1 2019 Vs H1 2020)

H1 2019 H1 2020


According to the DLS, all Cyprus districts experienced double-digit drops in sale contracts filed at the DLS during H1 2020 compared to H1 2019. Specifically, coastal districts of Cyprus such as Limassol and Paphos demonstrated decreases of 53% and 50% respectively.

Nicosia district, which is a market predominantly driven by the local segment, experienced the lowest hit on sale contracts filed at the DLS during H1 2020 (18% drop compared to H1 2019).

22%

29%

25%

17%

Geographical distribution of real estate sale contracts per district (H1 2020)


7%


(18%) (53%) (27%) (38%) (50%)%

growth

% Growth in no. of real estate sale contracts per district(H1 2019 Vs H1 2020)

Overall, the majority of sale contracts recorded at the DLS during H1 2020 were in Limassol (29%), followed by Nicosia (25%) and Paphos (22%).

Geographical Distribution of Transactions

28 PwC Cyprus

7Foreign Transaction Activity

No. of properties acquired by foreigners based on sale contracts filed at the DLS (2018 - H1 2020)

During H1 2020, a total of 1.391 properties in Cyprus were acquired by foreigners (in terms of sale contracts filed at the DLS), compared to 2.482 properties acquired by foreigners during H1 2019, representing a 44% YoY decrease. Looking at the monthly acquisitions of properties by foreign buyers, it is evident that even before the pandemic (January-February 2020), transactions appeared reduced compared to the respective months of 2019, and during lockdown, the decrease in foreign transactions exacerbated the prevailing reduced levels of activity.

Approximately 68% of properties acquired by foreigners in H1 2020 relate to Non-EU buyers (H1 2019: 70%). In Larnaca, 79% of foreign transactions relate to non-EU buyers. The respective share of non-EU resident acquisitions in Limassol stood at 71% and in Famagusta, Paphos and Nicosia stood at 65%, 65% and 47% respectively.


357 386 368

429

623

319 325 337

212

124

196 197

-

100

200

300

400

500

600

700

January February March April May June

2019 2020

2.187 2.482

1.391

2.180 1.999

-

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2018 2019 2020

No. of properties acquired by foreigners based on sale contracts filed at the DLS (2018 - H1 2020)

H1 2019

H2 2019

H1 2020

4.481 4.367

(44%)

H1 2018

H2 2018

+3%

(44%)

+3%

181

719

391

177

1.014

94

378 255

131

533

-

200

400

600

800

1.000

1.200

Nicosia Limassol Larnaca Famagusta PaphosNo.

of p

rope

rties

acq

uire

d by

fore

igne

rs

YoY % change in no. of properties acquired by foreigners per district based on sale contracts filed (H1 2020 Vs H1 2019)

H1 2019 H1 2020


NicosiaThe image part with relationship ID rId8 was not found in the file.

Paphos

Limassol

Famagusta

Larnaca

Nicosia

38%

27%

18%

Geographic distribution of properties acquired by foreigners based on sale contracts filed (H1 2020)



10%

(48%)%

growth (47%) (35%) (26%) (47%)

YoY % change in no. of properties acquired by foreigners per district based on sale contracts filed (H1 2020 Vs H1 2019)

The highest concentration of sale contracts filed by foreign buyers was in Paphos (38%), followed by Limassol (27%). The two coastal districts together make up two thirds of foreign transactions on the island.

All Cyprus districts recorded a year on year decrease, between 25% - 50%, in terms of number of properties acquired by foreigners (based on sale contracts filed at the DLS).

Although Nicosia only made up 7% of properties acquired by foreigners during H1 2020, the capital recorded a 48% drop compared to H1 2019. Limassol and Paphos follow behind with a 47% decrease each.

7%

19 37 55

122 175 191 157

25 18

42

67

102 87 125

21 -

50

100

150

200

250

300

350

2013 2014 2015 2016 2017 2018 2019 H1 2020No.

of p

rope

rties

tran

sact

ed

Volume of high-end residential properties sold (≥ €1,5mln)

Limassol Paphos Famagusta Larnaca Nicosia

8High-end residential property segment (≥€1,5mln)

The segment of high-end residential properties was perhaps the most badly hit segment during the first half of 2020. Based on PwC analysis, during the first half of the year, transactions of high-end residential properties reached 51 in total, plummeting by 78% compared to H1 2019 (234 sales of residential properties recorded in H1 2019).

Given that the high-end residential property segment is almost directly linked to CIP buyers, the suspension of the programme creates uncertainty with regards to the future of this segment and intensifies the need to re-focus and transform developments which were intended for this segment of the market.


2772

106

215

317 319324

51

Source: Department of Lands and Surveys (DLS), PwC AnalysisNote: High-end residential property segment statistics for all years were based on a data extraction dated 02/10/2020. Any differences with previous publications relate to amended Land Registry records (e.g. cancellations of previous sales etc.) and discrepancies between the date of agreement and respective filing date.

30 PwC Cyprus

234

51 -

50 100 150 200 250

H1 2019 H1 2020

Transaction value of high-end residential properties sold (≥ €1,5mln) (H1 2019 Vs H1 2020)

77% 51% 56%

61% 57% 61%

49%

53%

28% 35%

28%

30% 25% 40%

40%

7%

7% 6% 7% 4% 7%

-

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017 2018 2019 H1 2020

€mln

Transaction value of high-end residential properties sold (≥ €1,5mln)


€530 mln

€117 mln

(78%) (78%)Decline in € Decline in #

Transaction value of high-end residential properties sold (≥ €1,5mln) (H1 2019 Vs H1 2020)

Source: Department of Lands and Surveys (DLS), PwC AnalysisNote: High-end residential property segment statistics for all years were based on a data extraction dated 02/10/2020. Any differences with previous publications relate to amended Land Registry records (e.g. cancellations of previous sales etc.) and discrepancies between the date of agreement and respective filing date.

€80 mln

€190 mln

€280 mln

€570 mln

€800 mln

€810 mln €740

mln

€117 mln

10%of total transaction value of the sector

Transaction value of high-end residential properties sold (≥ €1,5mln)


In terms of sales value during H1 2020, the high-end residential property sector (≥ €1,5mln) totaled €117mln, a 78% drop compared to H1 2019.

The high-end residential property segment accounted for merely 10% of the total value of real estate transactions in Cyprus during H1 2020, (compared to 20% during H1 2019).

19 37 55

122

175 191 157

24

18

42

67

102 87 125

20

11

17

20 23 20 14 18

-

50

100

150

200

250

300

350

2013 2014 2015 2016 2017 2018 2019 H1 2020



12 11 11

4

6 7

-

2

4

6

8

10

12

14

January February March April May June

Volume and value of high-end residential properties sold (≥ €1,5mln) (January - June 2020)

No. of units sold

Looking at the volume and value of high-end residential property transactions on a monthly basis during H1 2020, it appears that in total, after the implementation of the lockdown measures in mid-March 2020, only 17 housing units were sold (during the 3 month period), with a total value of €44mln.


Volume and value of high-end residential properties sold (≥ €1,5mln) (January - June 2020)

Value(€mln)

32 PwC Cyprus

€24 mln €24

mln€25 mln

€11 mln

€18 mln

€15 mln

47% 53%

Apartments Houses

51%38%

6%3%2%

Limassol Paphos Famagusta

Larnaca Nicosia


During H1 2020, houses appeared to be the preferred residential property type reaching 63% of total high-end residential transactions across Cyprus, compared to 53% in 2019.

High-end residential property transactions per property type by number

2019 Η1 2020

Source: Department of Lands and Surveys (DLS), PwC Analysis* The PwC Analysis has been based on transaction data by the DLS in a digital format, extracted from the DLS Portal on 02/10/2020 and relate to transactions with an agreement date up to 30/06/2020.

Limassol district continues to hold the highest share in terms of number of high-end property transactions (49%), followed by Paphos with 41% of the share.

High-end residential property transactions per district by number

2019 Η1 2020

Source: Department of Lands and Surveys (DLS), PwC Analysis* The PwC Analysis has been based on transaction data by the DLS in a digital format, extracted from the DLS Portal on 02/10/2020 and relate to transactions with an agreement date of up to 30/6/2020.

48%

40%

2% 10%

0%


Larnaca Nicosia

49%

41%

2% 8%


Larnaca Nicosia

37%

63%

Apartments Houses

37%

63%

Apartments Houses

High-end residential property segment (≥€1,5mln)Transaction Volume by Price Band

Most of the transactions in the high-end residential segment during H1 2020 were in the €2mln – €3mln price band (representing 55% of the total volume of high-end residential property transactions).

Transaction volume by price band

1.5 - 2

2 - 3

3 - 5

> 5

2015 2016 2017 2018 2019 H1 2020

Transactions in all price bands demonstrated significant decreases during H1 2020, compared to H1 2019. Notably, during the first half of 2020 only 1 sale of a single residential unit exceeding €5mln was filed at the DLS.

2015 4

2015 19

2015 59

2015 24

2016 10

2016 30

2016 125

2016 50

2017 11

2017 48

2017 204

2017

2019

54

87

2018 12

2018 36

2018 196

2018

Η1 2020

80

17

2019 11

2019 25

2019 196

H1 2019

H1 2019

H1 2019

H1 2019

7

14

151

62

Η1 2020 1

Η1 2020 5

Η1 2020 28

Η1 2020

Η1 2020

Η1 2020

Η1 2020

1

5

28

17

No. of Transactions

Transaction volume by price band (H1 2019 Vs H1 2020)

(86%)

(64%)

(81%)

(73%)

34 PwC CyprusSource: Department of Lands and Surveys (DLS), PwC Analysis

1.5 - 2

2 -3

3 - 5

> 5

Transaction volume by price band

2015 2016 2017 2018 2019 H1 2020

17

28

5

1

62

151

14

7

1.5 -2

2 -3

3 - 5

> 5

Transaction volume by price band (H1 2019 Vs H1 2020)

H1 2019 H1 2020

3.393 3.153

1.703

1.111

400 600 800 1.000 1.200 1.400 1.600 1.800

1.000

1.500

2.000

2.500

3.000

3.500

4.000

H1 2019 H1 2020

€ (m

ln)

No. o

f per

mits

Building Permits Number Vs Value (H1 2019 Vs H1 2020)

Number of permits Value of permits (€mln)

36 PwC Cyprus

9Construction Activity

Building Permits Number Vs Value (m2 / €mln)

The total number of building permits issued during the first half of 2020 reached 3.153 compared to 3.393 during the first half of 2019, representing a drop of 7% YoY. In terms of value, building permits demonstrated a more significant reduction at 35% during the same period.

It is noted that construction activity was significantly hit at the beginning of the pandemic outbreak following lockdown measures. To a large extent, the drop observed may be attributed to the lockdown measures during a big part of the period under review, which inevitably affected the procedures of the private and public sector required to issue permits.

Source: Cystat, PwC Analysis

(7%)

(35%)Decrease in #

Decrease in €

8.777

7.506 7.172

5.341 4.933 5.014 5.354 5.728

6.408 7.218

3.153

2.640

2.065

1.632

1.141 859

1.071 1.158

1.720 2.055

3.729

1.111

-

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

- 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000

10.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020

€ (m

ln)

No. o

f per

mits

Building Permits Number Vs Value (m2 / €mln)

Number of permits Value of permits (€mln)

Building Permits Number Vs Value (H1 2019 Vs H1 2020)



33%

28%

15%

11%

13%

H1 2020


Distribution of building permits per district and surface (m²) during H1 2020

The largest concentration of new permits for development, in terms of licensed building surface (m2) during H1 2020, relates to Nicosia (33%), closely followed by Limassol (28%).

Limassol experienced the biggest hit during H1 2020, with the corresponding share of surface licensed, subsiding to 28% from the 47% share observed during 2019.

2019 Η1 2020

24%

47%

13%

6%

10%


Surface area (m²) licensed by district

Surface area (m²) licensed by district

Source: Cystat, PwC Analysis Source: Cystat, PwC Analysis

34%

31%

16%

9%

10%


34%

31%

16%

9%

10%


84%

16%

ResidentialNon-Residential

Breakdown of non-residential surface (2019 Vs H1 2020)

Surface area (m²) licensed

by property type

Surface area (m²) licensed

by property type

Warehouses

Hotel & Leisure

Retail

Offices

Other

With respect to the types of properties licensed for development during H1 2020, office uses appear to have recorded the highest increase (65% compared to H1 2019).

Hotels & leisure facilities and retail-related uses (which are directly linked to sectors that experienced the biggest hit as a result of the pandemic), recorded significant decreases in terms of licensed surface area during H1 2020 (66% and 81% respectively compared to H1 2019).

2019 H1 2020

39%23%

25%

27%

18%

7%12%15%16%

18%

% gr

owth

-50

-90

-40

-80

-30

-70

-20

-60

-100

10

60

20

70

30

80

40

90

50

(12%)Residential

(66%)

Hotel & Leisure

Warehouses

(81%)

Retail

(13%)

Other

Offices

% change of surface area (m²) licensed per property type (H1 2020 Vs H1 2019)


Overall, residential properties comprised the majority of licensed surface area during H1 2020 (83%), which is almost in line with levels observed in 2019.

As regards the non-residential sector, office developments and warehouses, took up part of the share lost from retail and hotel developments.

38 PwC Cyprus

22%

65%

83%

17%

ResidentialNon-Residential

84%

16%

ResidentialNon-Residential Source: Cystat, PwC Analysis H1 20202019


Construction material prices during H1 2020

Reflecting the declining levels of demand for new developments observed during H1 2020, the construction material price index indicated a drop for the first time since 2016. The average cost of construction material prices decreased by 0,5% during the first half of the year.

% change in construction price material index

2,7%

3,6%

0,8%

(0,4%)

1,0%

(2,1%)

(1,5%)

0,3%

1,7%

0,8%

(0,5%)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020


40 PwC Cyprus

How PwC can help

At PwC Cyprus, we have a truly dedicated and integrated team specialising in the real estate sector. Our team takes your whole business into account and focuses on your needs and objectives.

We are uniquely positioned to bring the best business advice with the best real estate advice, providing tailor-made solutions of high quality for specific needs to clients who develop, invest, own, lease, dispose or acquire any type of property in Cyprus.

Our clients draw comfort from working with PwC, the leading organisation of its kind in the world, and from the integrity, reliability and security that it brings with it.

Our strong international network combined with our local expertise, enable us to support our clients’ needs in all their countries of operation.

What we bring to our clients

Diverse team of professionals with backgrounds ranging from engineers, management consultants, property valuers, planning experts, finance experts and merger and acquisition specialists

In-depth understanding of the changing market forces that are affecting the local real estate industry

Extensive experience of qualitative and quantitative research techniques for real estate transaction activity

Regularly updated own-database of property transactions

A strong reputation for rigour, independence and impartiality

In-depth knowledge of Town Planning Regulations and Land Registry workings

Ongoing monitoring of the behavior of the market and its dynamics

Data analytics of transaction information

Unparalleled track record in property transaction advisory services


42 PwC Cyprus

10PwC Real Estate Advisory Services

Valuation analysis & verification• Valuation reviews for financial reporting

purposes• Property portfolio valuation analysis

Development advisory• Development Appraisals / Feasibility Studies• Highest & Best Use Analysis• Objective Assessment of Business Plans• Financial modelling

Real Estate Data Analytics & Market Analysis• Real Estate portfolio analytics• Benchmarking analysis• Market intelligence

Transaction advisory services• Real Estate Due Diligence• M&A advisory and assistance in raising finance• Transaction support• Go to market strategies

NPL portfolio advisory• Quality review of real estate collaterals• Liquidity / marketability assessment of portfolio• Data integrity and remediation• Research and analytics

Tax Advisory

Indirect Tax

Legal

International Private Clients

Tax Reporting Strategy

Our industry specialisation in the following sectors, gives you the benefit of our in-depth industry knowledge and experience.

11PwC in Cyprus

We support you to create the value you are looking for by providing specialised solutions based on quality. Together we build relationships based on trust and we say things as they are, to assist you to deal with issues that tomorrow will prove important.

We adapt the expertise of more than 1,000 professionals in Cyprus and the power of our global network of more than 284,000 experts in 155 countries to your specific needs, helping you make the difference.

In a demanding and challenging business environment, our diverse teams of experts are sharing deep knowledge and experience. We provide a broad range of services as listed below to meet your increasingly complex needs.

Audit & Assurance

Advisory

Financial Services

Funds

Energy

CySEC Regulated Investment Firms

Communication & Technology

Transportation & Logistics

Health

Banking

Real Estate & Construction

Retail & Consumer

Insurance

Hospitality & Leisure

Government & Public Services

Visit www.pwc.com.cy to discover the benefits we bring to you.


44 PwC Cyprus

NicosiaPwC Central, 43 Demostheni Severi Avenue,CY-1080 Nicosia P O Box 21612, CY-1591 Nicosia, Cyprus

LimassolCity House, 6 Karaiskakis Street, CY-3032 Limassol P O Box 53034, CY-3300 Limassol, Cyprus

PaphosCity House, 58 Gr Dighenis Avenue, CY-8047 Paphos P O Box 60479, CY-8103 Paphos, Cyprus

PwC offices in Cyprus


Constantinos ConstantinouPartnerHead of AdvisoryT: +357 – 22 555 [email protected]

Constantinos SavvidesDirectorIn charge of Real Estate AdvisoryT: +357 – 22 555 [email protected]

Ioanna CharalambousSenior ManagerReal Estate AdvisoryT: +357 – 22 555 [email protected]

Your Contacts for Real Estate Matters

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.© 2020 PricewaterhouseCoopers Ltd. All rights reserved. PwC refers to the Cyprus member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

46 PwC Cyprus

first half in review | h1 2020 cyprus real estate market · 2020. 11. 20. · h1 2020 - the key...

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