We wish we had a God sent talent to predict “dead right” the developments in the Cyprus real estate market for the year 2007. We can only submit our predictions based on our under experience, especially with regard to the year 2006 bearing in mind the trends that exist. We welcome any other opinions on the subject, but which must be based on professional data and not on personal wishes and feelings.
The year 2007 is expected to have the following general picture regarding property prices:
• General upward movement of property prices by around 10%.
• Building plots and development land within the towns are expected to increase by 12% and for the suburbs by 15%.
• New apartments will increase by 10% and older ones by 15%.
• Offices, especially in Nicosia, due to the existing shortage, an increase by 20% (high tech offices).
• Seaside land to increase by 20% and near the beach by 15%.
• For the Paralimni, Sotira and in general for eastern Cyprus, prices will increase by 20%, whereas in the Larnaca region by 15%.
• High cost houses within residential areas an increase of 5% and medium cost by 10%.
• Stores/workshops of an average cost/size by approximately 15%.
• Holiday homes not on the beach by 15% on average.
• Land outside the tourist areas 15%-20% increase.
• Agricultural speculative land with prospects of being included in the future in a development zone 20% (due to the change of the previous regulations of the local plans).
We must also bear in mind that the V.A.T. on some buildings, as well as the added V.A.T. on land purchases after 1.1.08, will cause by themselves an upward movement of costs, most of which will be passed on to the buyers. Of course, this constant upward movement of building costs/prices, reduces all the time their financial attraction and the number of able/willing buyers (reducing, thus, the rate of sale), whereas demand will be directed more and more towards the lower priced areas/units. For this reason we note that for areas away from urban centres, the property values are expected to increase by a faster rate than urban properties. At the same time the serious interest that we see now in the Cyprus property market forthcoming from local, as well as foreign investment funds (many millions of Cyprus pounds) have affected the supply of land and prices. It is also worth noting the sharp increase in the acquisitions of hotel/hotel apartments which are capable for conversion into residential units (despite the fact that this measure is pending approval).
We will publish by March 2007 our Property Index within which we will discuss in detail not only prices, past and future, but also comparative prices in our competitive countries. The index will also stipulate the going ons and a general information/uncertainties of the Cyprus property market. We published our first Property Index in April 2006 and we expect that our second one will be much more comprehensive and detailed. Regrettably our invitation towards other professional Offices, including the Governmental Lands Office, to cooperate with us, in order to have a more spherical approach, did not receive any positive response. What is clear however, that the past prediction of a “property bubble” came to nothing and quite to the contrary the prices continue their upward movement.
A most interesting report published last week by the Economist, provides a formula in order to check if prices are a bubble or not. Based on this formula, property prices in Cyprus are quite reasonable based on a yield of 4%-6%, plus the expected general appreciation of 4%-8%. Regrettably Cyprus does not invest in research and we find that as an Office, we are alone in our constant research and reporting. Our only encouragement comes from the Central Bank Governor, Mr Chr. Christodoulou, who in a letter to us, encourages us to go on (and for which we thank him publicly).
Download: Property Index 2005 (PDF 1MB – 40 Pages)
By Antonis Loizou, FRICS
View the original article on the Antonis Loizou web site
Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved.
