AS the world’s largest economies settle into a global recession, the Cyprus property market sends out mixed messages on how it’s confronting the crisis, with analysts divided on whether house prices are actually going up or down.
One real estate consultant argues the international financial crisis has hit the foreign buyers’ property market hard, pushing prices down by up to 20 per cent, while a home price index released yesterday revealed that house prices were still climbing last month, though at a slower pace.
An economic analyst attributes the doom and gloom picture of the Cyprus property market to developers who are asking “ridiculous prices” and seeking concessions from the government.
Parliament was informed on Tuesday of a 40 per cent decrease in property purchases. Domestic cement sales fell 11.4 per cent in August compared to the same month last year. The number of building permits issued in the first eight months of this year showed a drop of 12.7 per cent compared to the corresponding period the year before, a leading indicator of future activity in the construction sector. The number of units provided by the permits also fell by 9.5 per cent compared to last year.
So, with international banking giants pushing forward a global recession, and construction in Cyprus seeming to slow down, what can we expect from house prices on the island? Should Cypriots follow the lead of the British and French and invest in a safe box, hidden in granny’s room, or is the property market forging ahead in spite of the global crisis.
“Cyprus is doing extremely well in 2008 in all areas. You cannot compare it to 2007 when we had a 4.4 per cent economic growth rate, one per cent above potential growth,” said economic analyst, Dr Stelios Platis.
The latest results of the BuySell Home Price Index prepared by MAP S. Platis showed that house prices continued to rise in September, despite the worsening global conditions.
The index revealed a one per cent increase in house prices compared to the previous month and a nine per cent year on year increase for September. The latter reflects a gradual slowdown in price increases since January, when the year on year increase was more than double that.
“There was no drop in prices. Cyprus continues to defy the international crisis up until the third quarter. There was some reduction in the number of sales but in terms of falling house prices, on average, we are not seeing this,” said Platis.
“My estimation is the year on year increase will go down from nine per cent by the end of the year, but not to zero, and at least in line with inflation,” he added.
The economic analyst insisted that the price index constituted “the only valid gauge of the Cyprus housing market“.
“It’s based on actual selling prices of houses advertised by BuySell and its associates. Even the Central Bank uses estimates in its figures,” he noted.
Platis argued house prices had no reason to drop as property owners were not desperate or pushed to sell during a slowdown like they are in the UK or US.
Real estate consultant Antonis Loizou did not share the same view as Platis on current market trends.
“In a nutshell, the Cyprus market comprises of 80 per cent Cypriots and 20 per cent foreigners. Foreigners account for a huge chunk of the market and 70 per cent of those are British.
“Right now, we are experiencing a very sharp drop in demand where the British market is concentrated, like Paphos and Protaras. We have no problems where the Russians are concerned,” he said.
According to Loizou, the drop in foreign demand for property has led to price decreases for apartments of 20% in Paphos and around 15% in the Famagusta area. 90% of property buyers in Paphos are foreign, explained Loizou. Nicosia prices remained stable while Limassol saw a 10% increase in prices overall.
Platis pointed the finger at developers in explaining the bleak picture being painted.
“Sometimes there are motives behind developers in portraying the industry in crisis. They want to build higher buildings, pay less taxes and portray real estate as the last source of income for the economy which is now dying and needs help,” he said.
MAP S. Platis recently conducted a study on initial home asking prices, compared to final selling price.
“People have been asking ridiculous prices. Developers are willing to settle for less but they are lowering prices from a very high level,” said Platis.
“The asking price index in September alone dropped 9%. Imagine how far up it was, especially in those areas where people are claiming prices are falling.
It seems there are more developers than buyers now in the Cyprus market and the pieces of the pie are less,” he added.
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