The central bank said the trend also reflects a gradual rise in housing supply and construction costs remaining at historically high levels, with these factors confirmed through internal econometric analysis. During the fourth quarter of 2025, the general House Price Index (HPI) recorded a quarter-on-quarter increase of 2.3 per cent, compared with 1.2 per cent in the third quarter. This was driven by a 3 per cent increase in apartment prices and a 1.2 per cent rise in house prices over the same period. On an annual basis, house prices rose by 7.1 per cent in the fourth quarter of 2025, compared with 5 per cent in the previous quarter. Apartment prices recorded a sharp annual increase of 9.6 per cent, while house prices rose by 3.4 per cent.

Across districts, the general housing price index increased in Nicosia, following a decline in the previous quarter, while Limassol and Larnaca recorded accelerated growth. Specifically, prices rose by 1 per cent in Nicosia, while increases accelerated to 9.9 per cent in Limassol and 8.3 per cent in Larnaca. In Paphos, growth slowed to 7.6 per cent, while in Famagusta the index remained unchanged compared with the fourth quarter of 2024.

By property type, house prices declined in Nicosia for a fifth consecutive quarter, falling by 1.3 per cent year-on-year. House prices slowed in Paphos to 4 per cent, while recording accelerated increases of 6 per cent in Limassol and 4.5 per cent in Larnaca, alongside a 1.9 per cent rise in Famagusta following a previous decline. Apartment prices recorded accelerated growth in all districts except Famagusta, where they fell by 4.1 per cent. Specifically, apartment prices increased by 3 per cent in Nicosia, 9.3 per cent in Limassol, 12.2 per cent in Larnaca, and 13.6 per cent in Paphos.

The bank said that property demand remained strong, supported by data from the Department of Lands and Surveys. The total number of sale contracts rose by 18.7 per cent year-on-year in the fourth quarter of 2025, reaching 4,941 compared with 4,163 in the same period of 2024. This increase was driven by both domestic and foreign buyers, with purchases by Cypriots rising by 15.3 per cent to 2,901.

Sales to foreign buyers rose even faster, increasing by 23.9 per cent to 2,040 transactions. In terms of regional distribution, Limassol recorded the highest number of transactions at 1,407, followed by Nicosia with 1,124, Larnaca with 1,109, and Paphos with 1,036. Famagusta recorded the lowest number of transactions, at 265. Domestic buyers accounted for 84 per cent of transactions in Nicosia and 67 per cent in Limassol, while Larnaca and Famagusta showed broadly balanced participation between local and foreign buyers. In Paphos, foreign buyers dominated, accounting for 68 per cent of transactions.

The report also highlighted strong growth in housing loans, reflecting increased demand in the property market. Net new mortgage lending rose by 23.1 per cent in 2025, reaching €1.338.2 million compared with €1.087.2 million in 2024. During the fourth quarter alone, new housing loans increased by 26.1 per cent year-on-year. The weighted average interest rate on housing loans fell to 3.12 per cent in December 2025, down from 4.30 per cent a year earlier. This decline reflects the gradual easing of monetary policy by the European Central Bank since mid-2024, with interest rates falling below the eurozone median from May 2025. The central bank said this trend has further supported credit expansion in the housing sector.

At the same time, demand was reinforced by owner-occupation, investment purchases and short-term rental activity, as well as the strong performance of tourism and higher education.

Survey data from the CBC’s January 2026 Bank Lending Survey showed that net demand for housing loans increased in the fourth quarter of 2025, while lending criteria remained unchanged at strict levels. Banks expect demand and lending criteria to remain stable in the first quarter of 2026.

On the supply side, building permits for residential units increased by 36.1 per cent between January and November 2025, reaching 14,401 units compared with 10,584 in the same period of 2024. This indicates a continued gradual increase in housing supply in the medium term.

Data from the European Commission’s Economic Sentiment Surveys showed that the construction activity indicator remained positive for a ninth consecutive quarter, standing at 14.4 per cent in the fourth quarter of 2025. The construction materials price index recorded a modest annual increase of 1.4 per cent in the fourth quarter, remaining at historically high levels due to geopolitical developments and supply chain disruptions. For the full year 2025, the increase in construction material prices stood at 1.3 per cent.

Expectations for property prices also strengthened, with the European Commission’s expectations indicator rising to 29.1, compared with 25.5 a year earlier. This suggests that a greater proportion of market participants expect further price increases in the near term. The report also pointed to labour shortages in the construction sector, which continue to place upward pressure on prices. These shortages are consistent with wage increases in the sector exceeding pre-pandemic averages throughout 2025.

Source: Cyprus Mail