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Sales in 2012 plummet to record low

The number of properties sold in Cyprus fell to a record low in 2012 with local pundits predicting that this year will be worse than last, while the Financial Mirror concludes that 2013 will be another “Annus Horribilis”.

DESPITE tax incentives introduced by the Cyprus government in efforts to boost the island’s property sector, the number of properties bought during 2012 hit a record low.

The latest figures from the Department of Lands and Surveys reveal that property sales across Cyprus in 2012 fell to a mere 6,269 from 7,018 in 2011. As can be seen from the chart below, this is the lowest number of sales on record and less than half the number sold more than a decade ago in 2000.

Cyprus Property Sales 2000-2012

Source: Department of Lands and Surveys

The rise and fall of the property market

The collapse of the domestic market, which started in 2004, resulted from rocketing land prices. Although salaries kept pace with construction costs, land prices shot up more than five times between 1998 and 2008 pricing many local buyers out of the market.

The overseas market, which started to take off when plans for Cyprus to join the European Union were announced, reached its peak in 2007. Its collapse in 2008 was precipitated by the financial turmoil that engulfed the world and the nefarious activities of rogue property developers, lawyers and estate agents that received much publicity in the foreign media with questions being raised in the UK and EU parliaments.

Cyprus property sales chart 2000-2012

Source: Department of Lands and Surveys

Outlook for 2013

It will come as no surprise that the outlook for the property sector in 2013 remains bleak and that it will be significantly worse than 2012.

Speaking to StockWatch, property valuer Polys Kourousides said “The New Year will continue to be problematic and there will be no recovery because there are four factors that have negative impacts”.

According to Mr. Kourousides, the negative impacts are the lack of liquidity in the market, high interest rates that prohibit any investment, lack of confidence and the high levels of bad debts that will lead to a fall in property prices under the new methodology.

According to the Cyprus Central Bank property price index, house prices continued their downward spiral of recent years, with an annual decline of 5.8% in the third quarter of 2012. This is roughly in line with the RICS Cyprus index with an annual decline of 6.0% in residential property prices.

Lakis Tofarides, chairman of the Cyprus Land and Building Developers Association said that “things are so cold in the market that anything could be positive. The February elections will contribute to boost the negative sentiment”.

Solomon Kourouklides, vice president of the Cyprus Real Estate Agents’ Association said “With the completion of the election, uncertainty about the economy will be raised, provided that the new government will act more decisively and will fulfil all procedures on the memorandum. This will be the beginning of the beginning since liquidity will be injected in the state and banking funds”.

This will create a positive prospect provided that funds will be injected to SMEs in Cyprus while the people’s psychology will begin to stabilize and then to be reversed”.

“There is a small ray of hope that properties with the drop in prices will become more attractive for the foreigners, who seem to be the only ones who can buy without a loan”, he added, stressing, however, that recovery is not expected before 2014.

The Financial Mirror concludes that 2013 will be another “Annus Horribilis” for Cyprus based on a consensus of the views expressed by a distinguished panel of seven economists.

Readers' comments

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  • Costas Apacket says:

    Poor Alan – you’re missing the point.

    The Government would only receive about 1.3 Billion Euros in transfer tax revenue if they issued all of the outstanding Title Deeds, plus a load of IPT.

    Why would they need this sort of income when everything is sooo rosy in the garden and the gas is only 7 years away?

  • Poor alan says:

    Title deeds, Title Deeds, Title Deeds

  • Steve says:

    Interesting to see that the negative factors from Mr. Kourousides don’t include any direct reference to the title deeds debacle or to developer mortgages. They are not even on the visible scale.

    Other important factors that I believe will have a pronounced negative influence include the lack of agreement in the Cyprus bale-out and the new president. The money-laundering issues and the lack of government commitment to privatising parastatals is holding things up and the deadline for paying government and civil service salaries for January is approaching, not to mention the government’s obligation to pay back in three months the money it borrowed from parastatal pension schemes in December.

    We are a couple of months from electing a new president and I still have not seen any comprehensive statements of the policies and attitudes the candidates propose to adopt. Could it be that the outgoing president’s failings will be superseded by those of the new one? I hear that the most likely winner, Nicos Anastasiades, has let a few cats out of the presidential policy bag. He is not in favour of selling off state assets and he is not in favour of concessions to the Turks to reach a settlement over the Northern part of Cyprus, so no change there, then.

    For what we are about to receive…….

  • Mike says:

    Thankfully sales are falling which may, just may, re-align prices being asked to a realistic level commensurate with that required to sow the seeds of a sustainable recovery. Sadly I still hear talk of telephone number asking prices for what is after all, at best, a mediocre product albeit superficially coated to look pretty, in a third world environment in a Country with a predominantly xenophobic culture.

    Those of us who have known Cyprus for the last 50+ years have witnessed tremendous change, not much of it to the good, and a growing willingness to worship money. For an Orthodox Christian and Muslim State I personally find this a little dangerous as the bubble always had to burst eventually. We reap what we sow and deserve the politicians we elect.

  • Martyn says:

    There are just so many Negative factors, and hardly a Positive one in sight, that it seems remarkably premature to start talking about ‘beginnings of beginnings’, especially with an election next month, Troika ramifications and very likely more doubts and procrastination to follow. There may be occasional flickers but RoC property values are likely to continue to fall further and personally I doubt whether the ‘bottom’ will be reached before at least 2016-17.

  • Costas Apacket says:

    I must say, I’m really pleased about this.

    I know it sounds perverse, but let’s be honest, they’ve had it coming.

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