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Cyprus Central Bank Reports Q3 Housing Price Uptick Amid Robust Demand and Credit Expansion

by THEFUTURE.TEAM

Overview of Q3 Housing Market Trends

The Central Bank of Cyprus (Central Bank of Cyprus) has recorded a new rise in the House Price Index for the third quarter of 2025. This uptick highlights a dynamic market where apartment prices have accelerated while house prices demonstrate a notable slowdown. The overall picture is one of robust demand, a steady increase in supply, and continued credit expansion.

Differentiated Price Movements: Apartments Versus Houses

The House Price Index grew 5% year-over-year—up from 4.7% in the previous quarter—with a quarterly increase of 1.2% compared to 1.5% before. Detailed analysis reveals that apartment prices climbed by 1.7% quarter-over-quarter and 6.4% year-over-year, whereas house prices saw a modest rise of 0.4% quarterly and 2.6% annually. Regional variations further underscore market heterogeneity:

  • Limassol: 7.1% increase in the overall index.
  • Larnaca: 7.3% increase.
  • Paphos: 8.9% increase, though at a slower pace.
  • Nicosia: A slight decline of 0.5%.
  • Ammochostos: A decrease of 0.3%.

Notably, Nicosia has experienced its fourth consecutive annual decline in house prices (-2.7%), with Ammochostos also recording a drop (-1.6%). Conversely, apartment prices have risen in every region except Nicosia—with quarterly gains of 5% in Limassol, 9.6% in Larnaca, 10.5% in Paphos, and 5.9% in Ammochostos.

Demand Dynamics and the Role of Foreign Buyers

Data from the Department of Cadastre and Cadastral Measurement indicate that official property sale documents surged by 8.9% in the third quarter of 2025, rising from 4,081 to 4,444 transactions compared to the same period last year. Domestic buyer transactions increased by 8.6% while foreign buyer purchases grew by 9.3%. Regional transaction volumes were as follows:

  • Limassol: 1,431 transactions.
  • Nicosia: 981 transactions.
  • Larnaca: 921 transactions.
  • Paphos: 878 transactions (with 68% of buyers being foreign nationals).
  • Ammochostos: 233 transactions.

Credit Expansion Fueling Market Activity

The housing market is further buoyed by an impressive increase in new mortgage lending, reaching €972 million between January and September 2025—a 22% increase compared to the previous year. Concurrently, the average mortgage interest rate fell sharply to 3.03% in September 2025 from 4.27% a year earlier. Financial institutions anticipate a rise in net demand in the upcoming fourth quarter, even as lending criteria remain stringent yet consistent.

Supply Side Developments: Building Permits and Construction Activity

On the supply front, positive developments are measured by a 4.6% increase in building permits issued from January through July 2025 and a record of eight consecutive quarters of positive construction activity. The index of construction material prices saw a modest rise of 1.3%. However, expectations for future price increases have moderated, as evidenced by a significant decline in the European Union’s price expectation index—from 56.2 to 25.5 over the past year—indicating a more tempered outlook on future price surges.

Overall, these developments underscore a resilient and evolving real estate market in Cyprus, where strategic credit expansion and active buyer participation—both domestic and international—are reshaping market dynamics in the face of variable regional trends.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

by THEFUTURE.TEAM

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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