According to the Pancyprian Association of Real Estate Agents the slump in Cyprus property prices has now spread from Paphos to other parts of the island.
Interest rate increases, inflation and other factors have pushed demand from the domestic and foreign markets down resulting in severe problems across the island.
Chairman of the Pancyprian Association of Real Estate Agents, Solon Kourouklides, is reported as saying that in Paphos: “Sales have dropped significantly and the number of unsold properties has increased drastically. In the past three months, the external market has dropped by 30-40% while the internal market has dropped by 5%. Forecasters say that the situation will continue until the end of the year – early 2009“.
The slump not only affects the number of properties being sold, but their prices too. “Comparatively, Paphos had the highest prices. Today property prices are showing a dramatic decrease of up to 30% or even 50% for flats“, Mr. Kourouklides noted.
The problems affecting the property market are not restricted to Paphos. “The future of the property market is gloomy due to the slowdown in the number of sales across Cyprus. Commercial plots and land are largely unaffected since the demand by foreign investors (mainly Russians) who want to expand their business activities in the island, is big“.
Reasons for the downturn
According to the report, Mr. Kourouklides said that the slump was due to:
Interest rate increase by 125 base points in few months.
Impacts of the Central Bank Circular, which provided for the increase in the advance payment for the purchase of a home from 30% to 40%. Although it has been withdrawn, it still causes problems as it is too hard to regain the external demand.
Global economic crisis that hit the British market, which is 80% of external demand.
Devaluation of Sterling against the Euro.
“The interest rate increase, which pushes monthly instalments up, is the main reason for the drop in domestic demand, which will continue in the next few months“, Mr. Kourouklides stressed.
Other reasons are the drop in the purchasing power of the consumers due to the sharp increase in the price of fuel and the confusion from the upcoming imposition of 15% VAT on properties.