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Many properties will remain unsold

It is unlikely that the existing stock of new properties in the oversupplied markets of Paphos, Larnaca and the Famagusta/Paralimni area will be sold in the near future as they were built for “buy-to-flip” investors and are unsuitable for permanent living.

ANALYSING the present situation in the property market to ratings agencies Moody’s and Fitch the lead consultant of Leaf Research, Pavlos Loizou, explained the explosive situation that has been created after years of speculative overbuilding.

Large numbers of properties remain unsold and the market is oversupplied. Many properties were holiday homes built for “buy-to-flip” investors and are unsuitable for permanent living. Now that the period of frenzied investment speculation has come to an end, these properties are unlikely to be sold in the near future.

Very little construction activity is taking place as the banks have tightened their borrowing criteria and are withholding finance for almost all projects. However, there is a demand for city centre apartments, some holiday homes, student housing and projects related to renewable energy.

This situation adds to the reputation created by Cyprus abroad as an unsafe place to buy a holiday home or even permanent home, unless its Title Deed has been issued and is readily available.

Mr Loizou referred to the bank’s exposure due to the fact that property is used as the main collateral to raise finance. He noted that takes a bank 9 to 12 years get control over a mortgaged property – and even then, it is unlikely that it can be sold if it is the defaulter’s main residence.

Summing up the situation on the state of the market and where it is heading, Mr Loizou said that:

  • Local buyers are taking advantage some “special cases” to acquire properties in central/prime areas, but there is little demand for long term investment and almost no demand for land in the countryside.
  • As long as overseas buyers continue to face problems in their own markets, the local economy and property market will continue to suffer. Even when things stabilise, the market will never return to the same level of transaction volume.
  • Banks are pressurising valuers not to reduce prices in order that their loans appear to be adequately secured.
  • Prices in secondary areas and the price of land are likely to reduce further and will take a considerable time to recover.
  • Financial institutions will find themselves under additional pressure due to non-performing loans and they will need to come up with more “imaginative ways” to recover their money,
  • There is further pressure on the economy and the structure of society due to the changes in the public sector and the banks.
  • The property market’s parameters have changed but most refuse to acknowledge it!

 

Readers' comments

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  • Denton Mackrell says:

    What I find astonishing is how it has taken all this time for someone in the Cyprus property valuation & research business to state publicly for the first time what many buyers and independent analysts were saying and putting in print at least two years ago – and some were warning at least 5 years ago! But at least someone on the inside has finally admitted how bad things are. The whole property ‘industry’ has been in denial for years about the Title Deeds scandal and how overseas it has been crucifying Cyprus’s credibility and property market.

    Mr Loizou’s summary does not include any viable solution, perhaps because one would require radical action from the government (which as we have seen will never happen). Even the industry recognizes that the recent round of amnesty bills is just so much Mickey Mouse nonsense that has convinced no one of its efficacy.

  • stuart lodge says:

    Wake up Cyprus, you only have yourselves to blame over the construction. Release the title deeds and then you will start to notice a turnaround.

  • Martyn says:

    Absolutely right, the entire ‘good times’ Cyprus approach to designing, funding, building and Marketing ‘holiday’, retirement and investment properties has been in denial for far too long, the Crunch has yet to come and recent developments re Eurozone will further pressurise banks to define their actual exposures, act accordingly – which means further massive price reductions, with even then little chance of clearing the stockpiles of properties built for the Golden Age, not to mention all the repossessions, distressed sales etc in what in SME ways mirrors the US sub-prime scandal, the whole Cyprus property bubble has burst and the economy is still not geared for prolonged Recession, possibly even Depression: being locked into the Euro doesn’t help, no room for manoeuvre at National levels.

    BUT, Cypriots will tell you, when times get rough/tough ‘something always comes up’ – so capitalising on the suggested Massive reserves of undersea Gas now seems the Big Bonanza that could just save the Cyprus economy, way of life, but still the stockpiles of now unsuitable properties will remain, the banks will eventually have to ‘face facts’ and the big Bargain sell-off will get underway.

  • Costas Apacket says:

    How can you ‘flip’ a property that you do not have the Title Deeds for and therefore do not own?

  • Andrew says:

    Let us hope that the banks do come up with more “imaginative ways” to recover their money. At the moment all we can see is threat of enforced eviction due to rotten developer loans that unwitting buyers had no knowledge about.

    Hey I have come up with the solution. Lawyers are all filthy rich. Lawyers did not tell buyers about developer loans. Let the lawyers repay the banks.

    SIMPLES!

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