Property values fluctuate
Large corporations and high-net-worth individuals who acquire houses and apartments to resell or rent to third parties account for 20% of all property buyers in the United States.
This trend has been increasing for the past two years, as people with the requisite financial means purchase homes with the intention of renting them back to prior owners or reselling them to find a tenant.
As financial crises become more common, a growing number of people view the selling of their homes as an opportunity (a misnomer) to earn income to pay off their debts.
At the same time, Generation Y (those born in the 1980s and 1990s) has demonstrated a preference for renting rather than owning a property and prefers to live in cities with more facilities.
Around 80 million of the 140 million housing units in the United States are family residences.
In addition, 15 million of these family houses are rented, with 300,000 units owned by institutional investors.
The remaining, for the most part, are owned by self-employed experts.
While this is a small quantity, it is sufficient to determine which way the wind is blowing.
Cyprus real estate
The concept of owning a home is still appealing to many individuals in Cyprus.
However, we predict that, like most European countries, the local market will eventually follow the same path as the US.
According to a recent review of transactions in Nicosia over the last 18 months, flats accounted for 40% of the transaction value, with two-thirds of these transactions taking place in urban areas.
This reflects a growing trend among Cypriots, particularly the younger generation, to buy apartments rather than houses (which are cheaper, smaller, and closer to amenities), with many of the purchases coming from investors wanting to profit from the growing rental market.
Taking it a step further and looking at the data available, it’s clear that owning a property is losing some of its attraction.
Property owners made up 74.1 percent of the Cypriot market in 2009; by 2013, that percentage had declined to 73 percent, and by 2019 (the most recent data available), it had dropped even further to 67.9%.
In fact, 2019 was the first year in which Cyprus’s percentage of property owners went below the EU 27 average of 69.8%.
People’s housing demands will certainly vary when the country’s demographics shift (fewer births, smaller families) and social norms shift (more employment – more women in the workforce, greater need for blowing off steam/entertainment). Most individuals nowadays do not want a large house with a front yard and a swimming pool.
They want a smaller, more functional unit that is close to amenities and has minimal operating costs because they plan to spend a lot of time going out for coffee/dinner and traveling.
Furthermore, compared to thirty years ago, the number of people who can afford these residences has reduced dramatically.
We see this on the websites of asset management firms as well: large properties take years to sell, whereas apartments are much more liquid.
The population and households in Cyprus have expanded dramatically over the previous thirty years (from 185,459 households in 1992 to 303,242 households in 2011), resulting in several changes in the supply of residential property.
The main rise in supply, however, has been to meet the needs of international purchasers rather than locals.
Over the last two decades, the native population has gotten older and family sizes have dropped.
While we wait for the results of the 2021 census, in 1992, the number of households (i.e., permanent inhabitants) with one and two individuals was 69,418 and 156,679, respectively, accounting for only 37% of all households.
That number grew to 52 percent in the 2011 census.
Households with four or more persons, on the other hand, decreased from 45 percent in 1992 to 30 percent in 2011. (83,792 in 1992, 91,266 in 2011).
The arrangement of the housing units under construction has also changed.
In the 2001 census, residences with up to five rooms (including kitchen and living room) accounted for 52 percent of the total, but by 2011 that figure had risen to 61 percent.
Houses with three and four rooms saw the greatest percentage growth (18% and 23%) throughout the same time period, which is consistent with how families have altered over time, with family sizes shrinking and young Cypriots having 1-2 children.
The property market will continue to follow the increased demographic shifts. As a result, both the government and the private sector, i.e., developers, banks, and investors, must take the required strategic steps to account for them so that they are not forced to make decisions after the fact.