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Is the Cyprus property market frozen?

THE ONCE lucrative property market has come to a standstill as buyers, sellers and banks wait for the full effects of the global credit crunch to show, said property experts yesterday. According to Charalambos Petrides, Vice President of the Property Valuers’ Association, the credit crunch has come at a time when the property market is […]

THE ONCE lucrative property market has come to a standstill as buyers, sellers and banks wait for the full effects of the global credit crunch to show, said property experts yesterday.

According to Charalambos Petrides, Vice President of the Property Valuers’ Association, the credit crunch has come at a time when the property market is due for a correction.

“Prices had to settle down, otherwise we’d have problems in the future. It just so happens to have coincided with the credit crunch, and with sterling’s losses against the euro. The Brits are selling instead of buying, and repatriating capital so the effect is double,” said Petrides.

However, the combined effect of a market correction and global economic downturn remains anyone’s guess, added the director of Landtourist Estates.

“Sure there are effects on sales but no one knows how much they will be. It depends on the type of property and how deep the recession will be,” noted Petrides.

“There is a freeze in the market. Land Registry figures are a good indicator of the market right now. Property sales have gone down by around 40 per cent.,” he said.

The Land Registry figures for 2008, based on contracts of sale and title deed transfers, reveal sales in Famagusta have dropped by 45 per cent compared to the previous year, Larnaca by 40 per cent, Paphos by 38 per cent, Nicosia 15 per cent and Limassol 12 per cent.

Business for Nigel Howarth, a property adviser to British expatriates in Cyprus, reflected a similar trend.

“Since January things have quietened down quite a bit. I would say interest in buying property has gone down by two thirds,” he said.

The huge drop in sales can also be explained by the meteoric rise in demand for real estate in 2007.

“You have to bear in mind that 2007 was an exceptional year. The total amount of property sold in 2007 reached €4.53 billion, while between 2002 and 2006, the annual figure floated between €1.15 and €3 billion,” said Petrides.

The downturn was to be expected given last year’s outstanding results and spiralling prices, but the effects have not been equal across the island.

“Limassol and Nicosia are not so affected. The coastal regions with mass produced flats of no architectural value certainly have a problem. It’s hard to sell them now with the credit crunch. There’s a lack of cash and no one is buying,” said the Vice President.

Nicosia is mostly a local buyers’ market and prime locations won’t be affected.

“Time will tell. Everyone is adopting a wait and see policy right now. The buyer is waiting, the seller does not want to sell with the market like this, and the banks are waiting to see what’ll happen next before loaning more. It’s a frozen market,” said Petrides.

Michael Thomaides of Thomaides Properties in Limassol agreed that there was little movement in the property market.

“Sales are terrible, whoever says otherwise is lying. There is a small Russian flow for top end properties, but the English market has crashed,” he said.

“The downturn began at the beginning of the year. Trying to sell anything now to the core market above €2,000 per metre will prove very difficult,” he added.

“Resales are moving better than new properties but it’s a buyer’s market. Finance is the key. Even the millionaires are not willing to spend their own money.”

Finance is not just an issue for buyers though, noted the sales director.

“Banks need to support the good developers who’ve been issuing title deeds and doing everything properly. A lot of cowboys came into the market and thought it would last forever,” said Thomaides.

“Some developers are desperate for cash now. One in Larnaca is offering 20 per cent commission on sales, which is crazy.”

Regarding the prospect of VAT on land prices from next January, Thomaides was clear: “Putting VAT on land is suicide. It will destroy the market.”

Yiannis Thomas from Nicosia insisted that the true extent of the fall in sales was there for all to see in the government offices dealing with property transactions.

Thomas, who dabbles in property speculation, described his recent visit to the Tax Office to the Cyprus Mail.

“Usually the place is packed with huge queues of sellers going to pay their capital gains tax on profits of the sale. It can take a whole day sometimes. Yesterday I walked in and it was just me and the employees.”

“I asked the girl behind the counter what’s going on, and she replied there were no sales any more,” he said.

Copyright © Cyprus Mail 2008

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