THE PERFORMANCE of Cypriot housing market suffered the third highest decline in the Euro area with prices falling by 4.9% during the first half of 2011 behind Ireland, where prices fell by 11.8%, and Spain, where they fell by 5.5%.
The European Central Bank (ECB) sources its information from the Central Bank of Cyprus and it is mainly based on valuations collected from commercial banks and on information received from the Department of Lands and Surveys and private real estate agencies.
According to the ECB’s figures, the rate of the decline in house prices has accelerated and is more than twice the decline in 2010 and higher than the drop in 2009, when prices came under pressure from the recession.
Stockwatch reported that market factors believe that the price correction is normal and that it will be maintained as a result of the liquidity conditions and the general climate in the Euro area and Cyprus.
According to property valuer Polys Kourousides prices had increased sharply in previous years compared to the rest of the EU member states and must now be corrected.
Between 2002 and the third quarter of 2008, property prices in Cyprus saw a huge increase averaging 14.8%/annum. Since then prices have steadily declined.
The Central Bank says that the boom in property prices was due to the increasing number of immigrants and high demand from overseas buyers. According to its latest bulletin, the boom was also fuelled by low interest rates being offered before the crisis. However, conditions have now changed and downward pressures on the property market will continue.
“Both the construction activity and the property sector will continue to be in recession and prices will continue to drop”, it added.