THE SHARP fall in foreign demand for property in the first half of the year is reflected in the latest figures from the Land Registry; they are down by 78%. The slight recovery in property sales reported last Friday is entirely linked to domestic demand.
Estate agents and property developers who sold more than 3,800 properties to foreigners during the first half of 2008 sold just 847 during the first half of 2009. With the reputations of development companies being dragged through the dirt in the UK press on a regular basis, high lending rates in Cyprus are also having a negative effect on sales.
According to the Chairman of Real Estate Agents Association, Solomon Kourouklides: “The banks are keeping their rates high while other European countries are cutting them. This means that the foreign buyers turn to other markets or to their own country of origin, such as the British do. Also, it is difficult for the Cypriot businessmen to become active in the property sector due to the high cost of money.”
Chairman of the Land and Building Developers Association, Lakis Tofarides, believes that the drop in external demand was expected. “If the government fails to take the necessary measures and the interest rates won’t drop, the sector of constructions will go through tougher days. It seems that the government has not realized the size of the problem“.
However, the Cyprus banking system has liquidity problems with the liquidity level standing at just €1.8 billion at the end of May. In spite of receiving two cash injections from the government amounting to €2 billion since the start of the year, their ability to lower interest rates is limited.