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Cyprus developers concerned over banks’ lending freeze

PROPERTY DEVELOPERS yesterday said they were worried about the Cyprus Central Bank’s new rules for mortgage financing, fearing serious damage to tourism and the economy. A statement from the Cyprus Land and Building Developers Association said the move to curb excessive lending in the real estate sector affected 129 developers, 1,453 building contractors and 14 […]

PROPERTY DEVELOPERS yesterday said they were worried about the Cyprus Central Bank’s new rules for mortgage financing, fearing serious damage to tourism and the economy.

A statement from the Cyprus Land and Building Developers Association said the move to curb excessive lending in the real estate sector affected 129 developers, 1,453 building contractors and 14 mortgage lenders.

The entire sector contributes around £1 billion per year to the economy, it said.

“We consider that the sector is very important,” Association president Lakis Tofarides said.

“The sudden application of the package of measures has already created serious problems in the continuity of work of the companies in this sector.”

Tofarides said that the developers did not underestimate the dangers of a property bubble and understood the concerns of the Central Bank and why it took the decision it did.

As of last month, banks are not allowed to loan more than 60 per cent of the price of a property. Previously they were allowed to loan 70 per cent.

First-time buyers are not affected by the credit squeeze and may still borrow up to 80 per cent to buy a property.

The Central Bank took the measure to curb the rising rate of lending in the real estate sector to reduce the property speculation that has pushed house prices to unprecedented levels.

However Tofarides said the Central Bank needed to re-evaluate to avoid damaging the economy.

“With the measures that have been specifically announced we consider that this danger is real,” Tofarides said.

He said the financing of first-time property purchases by Cypriots and foreigners should remain at 80 per cent because foreign purchase incentives must be safeguarded.

If they were not, Tofarides said, they would look to the north to buy a property.

Foreign purchases were also contributing substantially to tourism, he added.

“The reduction already in demand from foreign buyers has begun to have negative repercussions,” Tofarides said.

He also said mortgaging for developers remain at 70 per cent and second buys by Cypriots and foreigners should be reduced to 60 per cent financing from the banks, he said.

To curb land speculation, Tofarides suggested financing be set at 50 per cent. “This will discourage speculation,” he said.

Copyright © Cyprus Mail 2007

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