DURING the first nine months of 2007, Cyprus property deals surged by a spectacular 42% year-on-year to CYP 1.7 billion or EUR 2.9 billion from CYP 1.19 billion a year ago in the same period, which was up 73% on the 2005 figures.
Real estate analysts explain that the spectacular activity in property is mostly due to the impending imposition of VAT on land sales, with many developers rushing to lock in the deals before the additional taxation kicks in.
Easy credit by banks is also widely blamed for fuelling an unprecedented buying spree, with many engaging in speculative activity, which the Central Bank of Cyprus is now attempting to stop.
By the end of October, bank lending to the property sector was up 33% with the public and the banks ignoring the new tougher lending measures introduced by the Central Bank, which reduced the leverage of property loans from 70% to 60%.
The government meanwhile is racking in huge gains from the imposition of capital tax on property gains. State income from Capital Gains Taxes jumped 155% to CYP 200 million in the first nine months of the year compared to CYP 79 million in the same period in 2006 and CYP 38 million in 2005.