ALTHOUGH the property market is certainly not at its best, I am disappointed by the analysis of the data and specifically by the explanations given as to the low percentage reduction of transactions in Limassol (-4%) compared with other cities. Limassol ‘is holding on because of the Russians’ was said.
I would ask all to spend a few minutes analyzing the Land Registry’s data.
Cyprus’ property market is significantly dependent on foreign buyers. Specifically, foreign buyers accounted for 22% of transactions in 2009 and 24% in 2010 and 2011 (note that in 2007 they represented about 50% of transaction volume). But if we study the data further, we see that each district has, as we would expect, different percentages of foreign buyers.
For 2011 foreigners accounted for 14% of buyers in Nicosia, 18% in Limassol, 31% in Larnaca, 33% in Famagusta and 36% in Paphos. We can see that Limassol has nothing special when compared to other towns in terms of the influence of foreign buyers and that one could even go as far to say that it may be better off because of the low percentage of foreign buyers in relation to that in other coastal cities.
Why do we have large percentage fluctuations in the number of transactions in other cities and not in Limassol? The answer lies in two different places.
The first is that due to the overall low transaction volume, small numbers create what is termed the “percentages fallacy”. If you have €1.00 and you lose €0.05, you lost 5%. If you have €0.20 and you lose €0.05, then you lost 25%.
Because Limassol and Nicosia represent 56% of transaction volume and because of the reduction in the number of transactions in other cities in previous years, the percentage changes in Larnaca, Famagusta and Paphos appear to be apparently huge even though in absolute numbers they are not.
For example, in absolute terms, in 2011 Famagusta had a drop in transactions of 134 (from 848 transactions in 2010 to 714 in 2011) and Limassol a drop in transactions of 84 (from 2,202 in 2010 to 2,118 in 2011). Although the difference between them is only 50 transactions, in percentage terms the annual reduction is 16% in Famagusta vs 4% in Limassol.
The second part of the explanation lies in where the reduction came from. The decrease in transactions by locals accounted for 76% of the total reduction (1,202 fewer properties were purchased by locals and 378 fewer properties by foreigners).
Of this reduction, the biggest drop in local buyers was in Nicosia (-29% compared with 2010) whilst the biggest reduction in foreign buyers was for properties in Paphos (-28% compared with 2010). Limassol had the third largest percentage decrease in overseas buyers by 20% compared with 2010. In contrast, the lowest fall in local buyers was in Limassol (0.4% compared with 2010) whilst Larnaca had an increase in foreign buyers (up 4% compared with 2010).
It seems that the main reason that Limassol is ‘holding on’ is not because of foreign buyers, but that the locals (who form 82% of its market) continue to buy. In contrast, the decrease in transaction volume in Nicosia is almost exclusively because of locals, whilst other cities have significant percentage fluctuations (but not so significant in absolute terms) due to the small number of transactions taking place.
Foreign buyers play an important role in Limassol’s real estate market, which can seem larger than it really is because of their high concentration in specific areas (especially to the east of the city). A simple analysis of the data however, clarifies that it is the locals who continue to trade and “motor” the market.
As aptly put by my childhood hero, Sherlock Holmes “The temptation to form premature theories on insufficient data is the bane of our profession.”
Pavlos Loizou MRICS
Lead Consultant – Leaf Research – www.leafresearch.com
@andyp – I don’t know.
Are they published in China Nigel?
@Costas Apacket – Russians are aware of the Title Deed issues, but I do not know whether this has been picked up by the local media. (However, I do know that some of my articles are republished on Russian websites).
Well researched and balanced article.
One question – Is there any evidence that the Russian media has picked up on the convoluted Title Deeds process in Cyprus and the pitfalls this can present to property purchasers?
@Nigel. Fully agree. I have commented similarly on the ‘percentages fallacy’ and the Russian component on the thread to your other article ‘Property Sales in Cyprus Plummet’.