A new StockWatch survey among twenty developers and real estate agents carried out last week shows that the crisis in the Cyprus property market has expanded. It has started to affect the value of shops and offices as well as plot prices.
The crisis is exceptionally intense on housing properties, where prices have declined up to 25%. Although in the previous survey crisis focused on tourist areas only, the new survey shows that it affects all housing properties in the market.
Sixteen of the total twenty developers support that prices fall. Only one sees that prices will go up and three expect that they will stabilize. Two developers stressed that conditions in Limassol differ due to the interest on behalf of the Russian businessmen.
All twenty developers and estate agents are actively involved in all cities of free Cyprus. The list includes businesses of all sizes, including the big.
Most of the respondents said that shop and office prices fall too, while others see a decline in plots and farms. At the previous StockWatch survey, none of the respondents expected a drop in this type of properties. Almost all anticipated that plot prices would stabilize.
According to a developer, he undertook the construction of a 23-flat complex in Larnaca in early 2008, but none of them has been sold yet. Two more developers said that they have not sold any property in 2008.
One of the developers that participated in the survey said: “The Company has a new flat of 90m2 in Protaras of CYP 100,000. We tried to sell it for CYP 90,000 but it was not sold. We pushed the price down to CYP 85,000, but still nothing. We will be forced to push price further down to sell it“.
A real estate agent from Larnaca said that the crisis does not concern housing properties only, but plots too. “About 5 months ago we were selling a plot in Alethriko for CYP 120,000. Now we are forced to sell it for CYP 90,000“, he noted.
“We are in the middle of a crisis and there’s no room for sentiment. Each one of us will have to push prices down to save his business“, another developer said.
“The market is moving in such a way so as to correct the fictitious property prices, which jumped 40% – 80% in 2005-2007“, a developer said.
According to latest central Bank data, housing property prices grew 15% in 2007 against 10% in 2006, 12% in 2005, 20% in 2004 and 8% in 2003. There are no official data for 2008 yet. These figures, however, concern all properties, while the developers referred to properties for sale.
“Two years ago we sold a property against CYP 50,000 thousand. Now we ask for CYP 200,000 – CYP 250,000. With such prices, how we can avoid a crisis?“, he wondered.
Some of the respondents talked about a depression in the property market with a disproportionate increase in offer, unemployment and loss. Due to the prevailing conditions, certain developers became more restrained. “We are more restrained now. We build fewer flats and houses to avoid stock and bank pressures“, they said.
“We expect things will get worse in 2009. That’s why many businessmen have already reduced their staff. Also, a number of businessmen are not professionals and their activities are not based on strong foundations. Therefore, they are now forced to sell cheaper so at to pay their debts“, they said.
The cooperation between the developers and the real estate agents has been affected too. Some developers say that sell without the agents’ intervention. On the other hand, the real estate agents support that developers offer a 10-15% additional commission to them if they manage to sell.
Great article, Let’s hope the gaurantee is made effective a.s.a.p rather than have to go through the endless government delays needed to ratify any changes that in essence do not make money for the government….sources tell me a lot of banks have become very wary of ‘developers’ requests for funding which is a good thing, but still this does not do anything to solve the problems of the toxic debts they have…at the end of the day there are issues for example issuing deeds due to the sheer bureaucracy and inefficiency of the ‘system’ but this does nothing to help the image of developers who have been given a bad name due to the few who have double sold properties etc …
I think the government is at fault, an article in Politis last week mentioned comments by a land registry official who stated it was not ‘their’ job to check if a property has already had a sales agreement lodged against it! with officials like this who needs unscrupulous developers?
If only this could be true..
Good – it appears that Mrs Reding at the EU was very very wrong in stating (earlier this year) there was ‘no need’ for the EU to send a deputation out to Cyprus to investigate this matter.
Not only does this reinforce massively my belief that a corrupt gravy train on the island is about to derail (long overdue) but also that parts of the EU administration are frankly inept and inefficient at tackling governance issues that matter.
If this forces change on both fronts – BRING IT ON!
“One possible solution would be for the government to issue a gold-plated guarantee to the European Union that no property buyer, regardless of when they purchased the property, will lose their home as a result of a developer’s debt”
As long as they don’t use my taxes to pay off the developer’s debt.
Lets not forget the developer has had the money and spent it, the banks were indifferent and didn’t care where it was spent but have extended the loans against proper banking rules and regulations Neither of these organisations deserve ‘rescuing’ with tax payers money
An excellent summary of these positive events. There’s hope at last!
Thank you Nigel.
Clearly and beautifully written, Mr. Howarth.
Well done indeed for putting it together. Nothing more to be said…