THE CYPRUS Land Registry expects property prices to fall by the end of the year as pressure grows on developers to offload unsold stock, it emerged yesterday.
Prices should start falling noticeably from September, due to the combined effect of a lack of movement in the property market and the large debts owed by developers to the banks. The Land Registry indicated that if prices of existing unsold property fall by as much as 15%; this would make the local property market more competitive for foreign investors.
Economic analyst Stelios Platis said that, according to the BuySell Home Price Index (BHPI), “selling prices are in fact already falling. Over the last three months, prices have fallen by around three per cent, which although modest, is part of a trend that will probably be gradual. We should see more of a price reduction in the second quarter.”
There do seem to be bargains to be had – for those with a bit of spare cash. UK real estate company Unique Living, which specialises in “superior properties in prime exclusive locations“, is advertising a four-bedroom villa in Souni, Limassol, at €895,000, reduced from €1 million. The company describes this as “an amazing drop of 10.5 per cent“.
Managing Director Serge Cowan is quoted in a company press release as saying that “the market is certainly giving all the appearances of being ready to bottom out“, adding that “2009 therefore, is a good time to buy while there are some distressed sales and good buys around.”
Platis agrees that the reason for a noticeable drop in prices would be the developers’ need to service their loans. “Developers will reduce their prices in order to liquidate their assets and avoid paying their profit to the banks in the form of interest“, he said, adding that this will not affect units that have not yet been built.
“The danger they face is not selling at a reduced price now, but then at the end of the year, after having racked up interest payments due to the banks, they may still not realise 100 per cent of what they need“, Platis said.
Platis is the creator of the BHPI, which is updated monthly on behalf of BuySell Cyprus Real Estate by MAP S.Platis. The Index is announced quarterly and depicts the movement of prices at which residential properties are actually sold in Cyprus, based on the extensive, Cyprus-wide, BuySell Cyprus Real Estate database.
He said that the property market is always cyclical, and historically prices have tended to rise during the summer months. “This summer will be crucial to indicate where the market is heading“, he said, adding: “I expect prices to fall year-on-year in 2009, but not as dramatically as happened in the UK.”
The lack of movement in the property market has already had a dramatic effect on government revenues. Data released yesterday by the Inland Revenue for the period January-May showed an 81% drop year-on-year in property transfer tax, from €144.4 million to €26.9 million.
In its 2009 budget, the Finance Ministry was counting on just a 7% drop over the year, and pencilled in a total of €350 million in revenues. A resurgence in property transactions in the later part of the year – however modest – would certainly help to offset what is looking like a gaping hole in the government’s accounts.
Copyright © Cyprus Mail 2009
Editor’s comment
It is essential that anyone considering buying property in Cyprus takes legal advice from a lawyer who is independent of the vendor, agent or property developer.
The British High Commission publishes a regularly updated list of lawyers who are able to give advice in English to British nationals. To obtain a copy of that list, click here
The UK Foreign & Commonwealth Office is advising Britons visiting Cyprus that “there are risks involved with purchasing property on the island of Cyprus” and that those contemplating buying property should “seek qualified legal advice from a source that is independent from anyone else involved in the transaction, particularly the seller“. To read the FCO advice in full, click here.
