THE SHARP drop in the demand for property in Cyprus has pushed the number of unsold apartments and houses up considerably, with some developers now offering discounts of up to 30% fearing that the situation will worsen in the coming months.
“In the first half of the year, developers tried to attract buyers with gifts such as free air-conditioning etc. In the second half, they couldn’t bear the pressure of the economic crisis and decided to cut property prices“, Chairman of Real Estate Agents’ Association, Solomon Kourouklides told StockWatch.
Some believe that big discounts are being offered in the expectation that the situation will worsen after September, when the problems in the tourist sector will be reflected in the Cyprus property market. According to Antonis Loizou “The property market will sink to the bottom after September. Areas such as free Famagusta, Avgorou, Dasaki Achnas, Xylofagou, Tersefanou and the seaside areas of Paphos might be under strong pressures“.
According to Loizou, the drop in prices is mainly attributable to the low demand and developers’ attempts to pay the cancellation debts of many buyers – mostly British – who cannot pay their debts and return their purchases.
Cybarco sales representative, Alexandros Sinka, explained that the large number of unsold apartments and houses are a financial burden for developers due to their cost of maintenance. “As time goes by and there is a large number of unsold apartments and houses, the chances of them being sold are minimized due to their wear and tear“.
Sinka also linked the discounts to the strategy that developers adopt to increase the Company’s capital adequacy during the tough economic crisis.
Property valuator, Haris Timotheou from Danos Consultants and Valuators, stressed that this period is a knife that cuts both ways for the developers.
“On the one hand, the land developers try to minimize the loss from the market freezing and push prices down, while on the other they have a significant number of indisposed properties that if they remain unsold, they will be loss-making for themselves“, he said.
Mr. Timotheou agreed that the problem affects the coastal areas such as Protaras, Pissouri and Paphos. However, he believes that city and town areas will also be at risk if the property market fails to recover soon.
Chairman of Land Developers’ Association, Lakis Tofarides wondered how developers can offer 30% discounts without giving the impression that prices formerly were unjustifiably high.
“The base cost of the developers’ materials does not allow such discounts. Only in specialized cases such as tourist areas like Paphos, Protaras and Tersefanou, where houses of 100 sq. meters were built for non-Cypriots exclusively, justify such discounts.”
There is a general acknowledgement that these discounts indicate a significant decline in prices being offered, which may signal further discounts. Chairman of the Valuators’ Association, Charalambos Petrides agreed that prices of non-competitive properties have declined by up to 30%. He clarified by saying that even though prices remain stable in Nicosia and Limassol, prices of properties of secondary importance have fallen by 5%.
Mr. Kourouklides anticipates that property prices will continue to be under pressure in the second half of the year, while this decline might expand to cities.