St. Petersburg and Limassol: Competing for the Attention of Home Buyers

Comparing the Housing Market Dynamics in Two Countries

Experts have noted an increasing interest among citizens of different countries, including Russia, in purchasing residential properties in Cyprus. Over the past decade, some of the most popular locations for this purpose have been Paphos, Limassol, and Larnaca.

The only exception to this trend was the year 2020, when the coronavirus pandemic had a significant impact on the real estate market. However, these circumstances were so exceptional that they should probably be considered separately. Despite this, the aforementioned Cypriot locations remain among the most frequently considered options for real estate investments.

Increased Interest Leads to Rising Prices

In 2022, the demand for housing on the island, from both Russian and international buyers, has seen a significant increase. Industry insiders in Cyprus have observed a 42% growth in the number of transactions during the first months of the year compared to the previous year.

The nature of demand has also shifted. In the past, buyers from Russia and other non-EU countries mainly purchased apartments and houses for recreational purposes. However, the focus has now shifted towards obtaining temporary and permanent residency permits.

Under local law, two conditions must be met to acquire the right to permanent residency through a real estate purchase. First, the acquired property must be classified as primary housing, and second, it must be valued at a minimum of 300,000 euros. However, in practice, buyers often have to invest significantly more, as properties meeting both criteria are rarely found in the Cypriot market, according to local real estate portals.

In this context, property prices continue to rise. Experts attribute the upward trend to two significant factors: increased demand and a steady increase in the cost of building materials. As a result, the average price per square meter in Cyprus has already surpassed 5,000 euros, and it is not the upper limit, especially in popular locations among foreigners such as Paphos and Limassol.

Limassol, in particular, leads the market in terms of property prices. Within the city limits, a budget of 300,000-400,000 euros can only secure very modest housing, such as a one-bedroom apartment with a floor area of 60 square meters. More comfortable and spacious properties are priced above 400,000 euros. Paphos is slightly more affordable, but not by much; a two-bedroom apartment for less than 400,000 euros is challenging to find.

It is possible to find properties for less than 300,000 euros on the island, but they are likely to be located in remote areas, especially in the mountains, or in need of significant renovations.

However, there is good news for home buyers. The rising property prices have also led to an increase in rental rates. In some cases, rents in Cyprus are growing even faster than property prices. This results in relatively high rental business profitability, which can reach 4-5% per annum in euros.

As an example, a 100-110 square meter apartment near the sea in Limassol might cost a buyer between 550,000 and 570,000 euros. Renting it out on a long-term lease for around 2,500 euros per month is quite feasible. In this case, the annual rental income would be approximately 4.5%.

Number of real estate transactions in Cyprus, 2013 – 2021

Reputation Draws In and Safeguards

For Russian home buyers who cannot afford the 300,000-euro threshold even after pooling all available resources, purchasing property in Russia, including its largest cities, is gaining new appeal.

Indeed, apartment prices in Russian cities with a population of over a million continue to rise in rubles. However, this growth is not as rapid as it was a year or two ago. Experts increasingly highlight that beneath the facade of rising costs lies market stabilization, as the soaring nominal prices per square meter are offset by several factors. 

First, the preferential mortgage rate, which the Russian government has decided to extend for the upcoming period. Second, a wide range of discounts and special offers from developers themselves, who are more willing to sacrifice a substantial part of their sales profits to attract additional customers, as the deficit of effective demand in the market intensifies.

This trend is also evident in the most popular residential development zones, such as Moscow and St. Petersburg. This year, Moscow became the only Russian city where real estate prices decreased, albeit slightly. The situation in the St. Petersburg conurbation is less clear-cut, as prices within the city limits have stabilized, even if they haven’t started to fall. In contrast, prices in satellite towns continue to rise due to sustained client activity.

Key growth points in St. Petersburg include well-known satellite towns like Kudrovo and Murino. Buyers are drawn to these locations by the relatively affordable housing, well-developed infrastructure, and proximity to the city. For instance, the western part of Murino is separated from St. Petersburg’s ring road by just one interchange.

Equally important is the reputation of some local developers that have emerged in recent years. This is particularly true for the investment company Euroinvest, led by businessman Andrey Berezin. The company has not only increased its revenue from apartment sales in the Leningrad region but also sold more housing in terms of quantity, with the number of lots sold rising from 1,420 to 1,487. These results have allowed the company to secure the third position in regional sales. Notably, this achievement comes amid declining construction and sales for several larger and more resourceful developers.

In addition, we should add the status of officially the most client-oriented builder in the Leningrad region, which the company received this year from the regional union of construction associations and organizations. But most eloquently, the prices in Murino II housing estate of 55-65 square meters of apartments are sold for 7.4 – 10.1 million rubles.

That is no more than 140 thousand euros, and thanks to the proposed discounts and subsidized interest rates, and even more profitable. Therefore, as experts say, before looking in the direction of Paphos, Limassol, or Larnaca, the Russians should once again pay attention to the domestic housing market. It may well be that investments in it can give a more solid result.

Leave a Reply