The Economic Research Unit anticipates that the surges in Cyprus property prices will stop in the next few years. The study, which is based on newspaper advertisements over the past two decades, registers all increases in the price of housing properties in the past few years, as well as the decreases in the 1990s. It expects that it will be difficult for the house prices to repeat the same upward trends in the near future.
“This is because the growth rate of two of the four most significant factors that led to the price hikes, inflation and GDP growth, will slow down significantly“, Panos Pasiardis and Christos Savva noted.
The study evaluates a number of macroeconomic factors that contribute to the variation in the property prices and supports that the increase in inflation, the cost of building material, the cost of labour and the growth rate of economy are the most significant factors affecting prices. The foreign workers and the CSE index affect negatively prices too.
The sample on which the study is based includes 4872 observations for the period January 1988 – July 2008, which include the house prices for the five municipalities of free Cyprus. These figures have been collected by the advertising part of two local newspapers and are based on “special offer”.
The authors of the study prepared the property price index using the prices of 1988 as a basis.
The index confirms the Land Registry’s estimates that the average annual increase in property prices reached 10%.
According to the study, in the past 20 years the average house price per square metre increased by 6.5 times.
In the past five years they doubled: In 2003, the prices recorded an increase of 27% and in 2008 (until July) of 23%. The figures change the picture on the annual increases released by the Central Bank.
The figures also show that property prices have dropped three times since 1988; in 1996 they fell by 7%, in 1998 by 10% and in 1999 by 1%.
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