THE Central Bank of Cyprus has estimated that the price of housing property will fall by 4% in 2010, following a fall of 8% in 2009. Its estimate is based on property valuations and other figures in April 2010.
According to the Central Bank’s June economic bulletin, activity in the domestic property sector during the first four moths of the year appeared to be stabilising, although the general climate is restrained.
The interest being shown by both Cypriots and non-Cypriots in purchasing housing is still low.
The bulletin also considered that the increased annual growth rate of housing loans during the first quarter of 2010 may be contributing, to an extent, to a slowing down of the downward trend in the demand for housing.
Once again, the Central Bank referred to the risks to banks in the sector from their possible exposure, stressing that. “The risks will be larger if the slump in property prices is higher than expected”.
Adding that “The risks for the financial stability may focus on the impacts of a possible larger-than-expected correction of housing prices as well as the further weakening of the domestic economic activity that is related to the sector of housing properties”.
However, the Central Bank does not foresee a sharp fall in property prices: “Although a sharp drop in house prices, which would lead to a decline in the net value of households, could maximize the risks for financial stability, the possibility of such occurrence in the short term remains low”, it said.
In addition to the risks resulting from the fall in property prices, the Central Bank also referred to further risks associated with household revenues due to unemployment levels.