ACCORDING to figures just released by the Cyprus Land Registry Department, the number of property sale notes during the period January – October 2008 reduced by 24.2% compared to the same period last year. While the number of notes in October fell by a massive 50.2% compared with October 2007.
Property sale notes show the activity recorded in the property market as these notes refer primarily to new property without an ownership title (Title Deed). This is a further indication that the Cyprus property market showing signs of fatigue and that a further slowdown is underway as local economic growth slows.
Chairman of the Land and Building Developers Association, Lakis Tofarides, was upbeat about the market’s future.
“Cyprus property has not been affected, at least not to a significant degree, with the possible exception of second home sales in the coastal areas,” he said – but he went on to admit that over the past 10 months, there had been a “discernible and worsening” fall in demand for real estate.
According to Tofarides at the moment “there is no reason to panic” and fears that Cyprus might suffer a similar fate to America’s shattered property market were entirely unfounded, he added.
And although a small drop in real estate prices was inevitable, “nothing dramatic” was on the cards.
Tofarides said the major problem facing the property sector is the imposition of 15% VAT on property from 2004, which led to a dramatic increase in prices and generated millions in added revenue for the state in the form of taxation, which is now set to turn around.
For example, for a house costing €120,000 in 1999, the transfer fee was €4,270. Today, the same property would cost €400,000, with the transfer fee going up to €25,300.
“Come next year, when the VAT will go up further, the state will end up harvesting up to 30% on the sale of a house… that’s ridiculous,” said Tofarides. Another source of grievance hindering the growth of the property sector is red tape and the threat of new VAT on land deals.
Tofarides acknowledged that banks’ current lack of liquidity was a problem, which is why the developers want the government to issue bonds to pump liquidity into the banks to be given as loans for property purchase.
“Our sector employs some 45,000 people, and has a turnover of €2 billion contributing 20% of GDP. Every year, the state rakes in some €500 million from the property sector. Now imagine what would happen if real estate entered a slump and our revenues were cut in half,” said Tofarides.