Real estate and economic growth. How are both affected by economic crises: the case of Cyprus

Abstract

This essay examines the future house price changes based on previous changes for the past 12 years from 2010 to 2022. It provides information on Cyprus’s past crises, economic growth, real estate market literature recent data, and possible upcoming changes in house prices. In 2022, transaction activity levels exceeded expectations, reaching a record high of €5,2 billion in real estate transaction value. Economic growth and the real estate market are linked, whether the real estate market is expanding growth rate is also positive. Moreover, it discussed Cyprus’s recessions affecting the real estate and GDP growth rate of the country. Next, it refers to real estate investment and the real estate cycle. Cyprus is in the expansion phase based on the results and the literature of real estate cycles. An investor or developer will invest money in the phase of recession and recovery but in the expansion, they need to sell the properties overpriced. Moreover, in the literature forecasting real estate prices have three kinds of ways to predict. The research used serial dependence in real estate returns and weak-form market efficiency. Data was provided from surveys in the Central Bank of Cyprus, Cystat, Eurostat, and the Department of Lands etc. The aim is to estimate future house prices to answer the question of whether it is more profitable for a junior investor to buy now or to wait. According to the results, during expansion, the prices for houses are higher than the market value. For an investor, this is a great time to sell at a higher level its property and have profits.