Amid record-high property prices, a pressing question looms over thousands of citizens, particularly young couples: to rent or buy a home?
This challenge is exacerbated by a period in which loan interest rates remain elevated, and de-escalation trends are slow to unfold, mirroring the situation in the rental market, whether for apartments or houses.
Today, individuals aspiring to secure their house must carefully consider all factors before taking the leap. In contrast to previous years, the primary concern revolves around the interest rates tied to housing loans, despite the banking sector’s efforts to promote housing products with fixed interest rates spanning three, five, or ten years.
The objective is to ensure that clients commit to a stable instalment immune to fluctuations in the European Central Bank’s monetary policy.
The housing market, characterised by a new surge in both sales prices and rents for specific areas, prompts prospective buyers to ponder whether the monthly rent or a slightly higher sum could enable them to make the transition from tenant to property owner.
Instalments higher than average income
A current scenario involves a housing loan of €200,000, repayable over 20 years at an average purchase interest rate of 6%. The resultant monthly installment stands at approximately €1,430.
This sum, by today’s standards, is far from trivial, especially when considering that it approaches the average income in Cyprus. Aspiring homeowners must also factor in the need to set aside a significant amount—around 30%—to finance a portion of the property’s value.
Essentially, with a budget of €200,000, interested parties may secure an approximately 100 sq.m. used apartment. Research conducted by Phileleftheros on real estate sales websites reveals that a new 86 sq.m. apartment in Lakatamia is listed at €165,000, while a 90 sq.m. unit commands a price of €210,000.
Rental realities
Even in the face of today’s market dynamics, where rents in specific regions remain steady, the cost of renting an apartment in Nicosia, under 100 sq.m., varies between €750 and €1,000, placing it below the monthly installment for a housing loan. The location, apartment size, construction age, and city locale all play pivotal roles.
Meanwhile, in Limassol, apartments are both scarce and pricey. Extensive research on various real estate platforms indicates that rents for apartments under 100 sq.m. in the city centre can reach €1,500 per month, escalating to €2,200 per month for units spanning 130 sq.m.
In Larnaca, rental prices also hit the high notes, with a two-bedroom apartment in the city centre demanding €900 per month, while a three-bedroom residence could command up to €1,300 monthly.
Demand dropped
The Central Bank recently published a survey on bank lending, shedding light on the economic impact. The reduction in demand for housing loans during the third quarter of 2023 is attributed to soaring interest rates, dwindling consumer confidence, and weakened prospects within the housing market.
Statistical data on monetary policy reveals a significant 20% decrease in the provision of new housing loans during the first nine months of 2023. This downturn is primarily attributed to elevated interest rates and stringent lending criteria imposed by financial institutions.