- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Double-digit falls forecast for property prices

A REPORT published by Leaf Research, a real estate advisory firm, states that property prices will continue to fall over the course of this year and next, with the fall in residential real estate and land prices reaching double digits.

Based on similar parameters employed by PIMCO for its due diligence exercise, Leaf Research concludes that, in the extreme scenario, the fall in property prices will approach 25% by 2015 from their present level.

Based on Leaf Research’s extreme scenario, over the next two years:

Leaf Research expects that property prices will reach their lowest point in 2015/2016, when they will have fallen from their 2008 values by:

(These percentage falls are quite similar to those in Ireland and Spain).

Leaf Research believes that at their present values, properties are overpriced and beyond the purchasing power of the domestic market.

The local market currently accounts for around 80% of transaction volume; with household debt being one of the highest in the Eurozone having increased by 91% since 2006 (housing loans have increased by 201% over the same period). This high level of indebtedness combined with a high and rising unemployment rate may lead to a situation of a prolonged recession as local households are trapped in negative equity as the economy continues to contract.

As a result of their non-performing loans, banks may have to sell-off the collateral (real estate) underpinning those loans. This will put further downward pressure on property prices especially as the situation with the creation of the asset management company (AMC) which will take over the loans becomes clearer.

On a more positive note, the Company anticipates that the top end of the market will continue to improve as the recovery in the global economy continues.

Further reading

Cyprus Economy and the Property Market (2013-2014) – in Greek