IT APPEARS that the Cyprus property market is going though its worst period for the last ten years with most of those involved in the sector predicting that the current price falls will continue and may even accelerate in the coming year.
The news comes from a new survey carried out by StockWatch which questioned 22 Cyprus property developers & estate agents about the performance of the sector over recent times and their forecasts for its future.
Almost all of those who took part in the survey support the view that property prices have fallen and the majority believe that things will get worse in 2009.
As previously reported, the StockWatch report is based on the actual experiences and predictions of property developers and estate agents. These conflict with the view of the Central Bank of Cyprus which has reported that prices of resale and new properties have increased by 10% in 2008 following a 15% increase in 2007. (The Central bank has been particularly cagey about releasing details of how it calculates it figures, saying only that its index is based on “estimates of the value of properties used as a security for the granting of loans by the banks.“)
The majority of those who took part in the StockWatch survey consider that the turning point came with the collapse of Lehman Brothers in the US and the expansion of the financial crisis into Europe and the UK, where the majority of those buying property in Cyprus are based.
Only one person who took part in the survey believes that prices have not dropped; most of them agreed that falling prices mainly affect the popular seaside towns such as Paphos, Larnaca and Famagusta; areas that are heavily dependent on British buyers. Some of them believe that there has also been a downturn in the Limassol market, while others stressed that prices in the area have steadied. Their views on the market in Nicosia differed as demand for property in the capital city is mainly driven by the domestic housing market.
Most agents and developers expect that things will deteriorate in 2009. One respondent believes that the situation will stabilize and another one believes that the market will recover after the spring.
“Things will deteriorate and we should not be naïve. The banks already push the borrowers, while they have stopped granting loans. Moreover, some lose customers due to that stance“, one of the businessmen surveyed noted.
According to latest Inland Revenue figures, activity in the property sector dropped by more that 60% during the two months following the collapse of Lehman Brothers.
A large number of houses and apartments remain unsold. It seems that the British are selling their houses at a reduced price to take advantage of Sterling’s low value compared to that of the Euro.
But unlike the British, the domestic market appears be on hold.
“The psychology due to the rumours for a drop in property prices together with the lending difficulties keep the would-be buyers on hold for better opportunities“, the businessmen said.
Even the Limassol-based businessmen who took part in the survey said that things are similar there. “The number of Russians who buy is small and they are those who prefer luxury apartments or houses by the sea“, stated one businessman.
The businessmen are of the opinion that that many developments will not be completed. A developer from Larnaca accused the banks for granting loans to inexperienced developers easily, who expanded to mountainous regions and many houses have been abandoned unfinished.
However, some of those surveyed expressed their satisfaction with the latest developments “since things will be clarified in the profession“.
Many developers stopped building new projects and have not renewing contracts with their subcontractors, those employed in the property sector face job losses.
“What goes up, comes down and the crisis will bring prices to normal levels“, one real estate agent concluded.