Berkos Properties & Development

CYPRUS

Cyprus Service Sector Drives Real Estate ROI to New Highs

The rapid expansion of Cyprus' service sector in recent years has significantly boosted the country's real estate investment landscape.

As the backbone of the Cypriot economy, the service sector’s growth not only drives immediate economic activity but also creates a favorable environment for property development and investment.

Robust Service Sector Gains Across the Board

Cyprus’ tertiary sector saw remarkable growth throughout 2023, with key service branches posting substantial increases in production value, value added, and employment. According to the Cyprus Statistical Service, almost every segment of the services sector expanded, with accommodation and food service activities rising by 20.5%, information and communication services up by 17.4%, and real estate activities themselves growing by 16.3%. Additional gains were seen in transportation and storage (+6.7%), professional and technical activities (+10%), administrative and support services (+16.9%), education services (+10.9%), and health and social work (+8.7%). The breadth of this growth highlights the sector’s resilience and adaptability, as well as its centrality to the national economy.

Elevated Role of Services in Cyprus’ Economy

Cyprus stands out in Europe and globally for the dominance of services in its economy. Trade in services accounted for a staggering 127% of GDP in 2023, an exceptionally high figure that underscores the extent to which Cyprus relies on service exports and imports as economic drivers. This robust performance provides a strong foundation for overall economic stability, making Cyprus attractive to both domestic and international investors.

Catalyst for Real Estate Investment

The buoyancy in the service sector directly drives demand for real estate, especially in commercial, office, and hospitality assets. As sectors like accommodation, food services, and information technology expand, businesses require more office space, hotels, and infrastructural developments. The 16.3% growth in real estate activities is not only reflective of construction and property sales but is also symptomatic of broader economic dynamism fueled by services.

Additionally, the surge in employment and higher value added within the service sector leads to increased disposable incomes, supporting the residential real estate market. Migrant professionals and foreign service providers attracted by Cyprus’ business-friendly environment generate new demand for high-quality housing, premium office spaces, and retail outlets.

Macroeconomic Tailwinds and Foreign Investment

Economic growth continues to gather pace, with the first quarter of 2025 seeing GDP rise 3.0% year-on-year, the fastest expansion since early 2022. This growth has been partly attributed to a rebound in the export of goods and services, which includes key services like tourism, finance, IT, and professional services. Domestic consumption also remains robust, providing further support to property investment.

According to the IMF, investment is set to become an even stronger driver of growth in the coming years, underpinned by structural reforms and continued orientation towards a service-based business model. The expected stabilization of growth rates at around 3% in the medium term is likely to sustain steady demand for both commercial and residential real estate, as companies expand and international firms establish local presences in Cyprus.

Positive Feedback Loop for Property Markets

The interdependence between service sector growth and real estate creates a positive feedback loop. Service sector expansion boosts property demand and prices, in turn incentivizing investment in new developments and infrastructural projects. The construction sector benefits from this synergy, feeding back into job creation and further service sector expansion.

Hotel and hospitality segment growth is particularly influential; as tourism-related services surge (up over 20% in 2023), there is a sustained need for new hotels, resorts, and short-term rental properties. Simultaneously, the expansion of tech and professional services increases the requirement for modern office spaces and co-working hubs.

Conclusion

The ongoing expansion of Cyprus’ service sector is proving to be a powerful engine for real estate investment across the island. With services firmly entrenched as the leading contributor to GDP and employment, and with foreign and domestic investment on the rise, Cyprus’ property market looks set to remain buoyed by this mutually reinforcing cycle for the foreseeable future.

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