AS WE approach the end of the year it is apparent that the Island’s property market is in a deep recession with little hope of a recovery in the near future.
Domestic sales have been hit by the uncertainty in the property market, the lack of liquidity plus the high cost of loans, record levels of unemployment and the problems with the Island’s economy.
British buyers have virtually deserted the market as a result of the revelations about Title Deeds and the misdemeanours of property developers, real estate agents and banks featuring in the UK media.
Property sales to overseas buyers in Paphos, once a favourite of the British, are down by nearly 90% on the numbers sold in 2007 and are at half the number sold ten years ago at the start of the property boom.
Like many other countries in the European Union, the UK has problems with its economy. Rising levels of unemployment, the fall in the value of Sterling against the Euro and the general economic situation has reduced the number of Brits buying overseas property.
But there are still many Brits investing. In Spain for example, sales to overseas buyers increased by nearly 25% during the third quarter of 2011 compared to last year, while sales to overseas buyers in Cyprus over the same period fell by 30%.
SINCE RICS Cyprus started publishing its Property Price Index in the last quarter of 2009, apartment and house prices have been falling steadily.
Apartment prices have fallen by an average of 19% and those of houses by 12%. But these falls have not been consistent across the Island. Prices of apartments in the Paralimni/Famagusta area have fallen by 28% and house prices in Larnaca are down 18%.
The commercial centres of Nicosia and Limassol seemed to be weathering the storm quite well. But the latest report from RICS shows that both seem to have succumbed to the problems of falling prices experienced in the other urban areas of the Island.
Government action and incentives
DURING the year, the Government introduced new legislation in its endeavours to instil confidence in the market and increase the flow of revenue into state coffers.
The ‘Town Planning Amnesty’ laws were approved in March. These were designed to enable the legalisation of various building irregularities that were preventing the issue of some of the 130,000 Title Deeds that were pending. Initially set to last for six months, the Amnesty was subsequently extended for a further six months. But it had an unpleasant sting in the tail which meant that properties suffering from severe planning infringements could not be sold or mortgaged.
The Sale of ‘Immovable Property (Specific Performance) Law’ came into force earlier this year replacing the old ‘Sale of Land (Specific Performance) Law’. This new law provided additional protection for those buying property, but caused outrage amongst existing purchasers when they learnt that its provisions were not retrospective.
The government also reduced the VAT on property for first-time buyers and abolished/suspended Property Transfer Fees for a period of six months in efforts to kick the Island’s beleaguered property market back into life. Depending on circumstances, these incentives could reduce the cost of owning a €250,000 house or apartment by around €38,000.
PROPERTY valuer Polys Kourousides believes that property prices will be reduced further and his views are echoed by Pavlos Loizou in the latest RICS Cyprus Property Price Index where he says “that there is still room for re-pricing of capital values to take place”.
It is unlikely that the government can afford to give the property industry any further incentives, but it can still do much to improve the protection afforded to those buying property. It needs to undertake a wholesale review and reform of the laws relating to the purchase of property – and then provide the authorities with the necessary powers to implement those reforms and to ensure their proper enforcement.
Top of the government’s list of priorities: full legal protection for purchasers and Title Deeds on delivery of a property.