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Time to buy? House prices fall 20-30 percent

Although prices of property in some part of Cyprus have fallen by as much as 30 percent, the risk in the market has increased and calls for extreme caution by prospective buyers and their lawyers warns leading expert.

A SIGNIFICANT drop in real estate values is creating new opportunities for buyers of second or holiday homes, with commercial and retail properties, primarily in the capital, remaining unaffected. But property consultants still advise caution.

Residential property prices have fallen by as much as 20% and 30% in the past three years, with the most affected being Paphos, Sotira and other areas popular with foreign holidaymakers and retirees, according to a leading expert in the field.

Areas that rely on local buyers, mainly from Nicosia, have been doing relatively better with prices in Protaras and west of Larnaca (Pervolia, Kiti, Tersefanou) recording smaller drops, real estate valuer Anthonis Loizou wrote in an article that appears in our Greek section, ????? & ?????.

Title deeds affect British, Russians; Cypriots “unconcerned”

The drop in property prices can also depend on other factors, which, apart from location, also have to do with quality, facilities (pools, etc.), as well as the bad publicity, especially in the Paphos area, over the problem with Title Deeds,” Loizou wrote in his article.

This bad publicity, primarily generated by owner action groups, has also reached the Russian market, with many Russian buyers now primarily concerned if there are Title Deeds or not,” Loizou added.

Strangely enough, this phenomenon does not seem to concern other foreign buyers in other areas, while local Cypriot buyers are not at all worried with the problem,” he added.

Loizou cites an example whereby the price for a beach-front apartment in Protaras (with permit), dropped from €5,000 per sq.m. in 2008 to €4,000 per sq.m. in 2009/2010, despite the fact that this was in one of the more competitive and high-value projects in the area.

the risk in the market has increased and calls for extreme caution on behalf of the buyers and their lawyers

Holiday units and apartments in the Kappari area dropped from €1,700 per sq.m. in 2008 to €1,200 per sq.m. with sluggish interest, recording a fall of 30%.

The opportunities when British owners would sell their properties at rock-bottom prices have been limited to just a few, while due to the financial troubles of the sellers as well as the developers, the risk in the market has increased and calls for extreme caution on behalf of the buyers and their lawyers,” Loizou warned.

Own vs holiday

Prices for own homes in Paphos dropped 8% in 2008, 10% in 2009 and 5% in 2010, for an accumulated 3-year drop of 23%.

In Limassol, prices dropped an accumulated 10%, with no change in 2010, -25% in Larnaca, -20% in Protaras, -35% in the Famagusta area and -25% in Nicosia.

Holiday homes in Paphos lost an accumulated 35%, in Limassol -25%, in Larnaca -33%, in Protaras -35% and in the Famagusta area -40%.

Commercial demand

Within the commercial property market of Nicosia there is significant demand, which is balanced by the available supply, according to a report by property consultants and valuers Danos. Therefore, the vacancy rate is very low, estimated at 5% to 8%.

Supply is expected to be steady throughout next year, the Danos report said, adding that investment gross yields are in the range of 5.5% – 6.5%, while average rental prices have decreased by 15% since 2000. Current rental levels are considered sustainable, despite traffic congestion and parking problems.

In the broader area of Nicosia, investment yields for shops and offices fluctuate between 5.5% and 6%. Market values for shops that outside Nicosia centre appear to be lower, but in many areas can be as high as the ones in the centre, with a parallel demand for decentralised retailing formats (malls, DIY stores) remaining strong.

The property market has been in recession since mid-2008 with sales down 40% and the second homes and holiday homes sector hardest hit. A lack of property investment from the UK and the drop in the value of Sterling are regarded as reasons for the fall, especially in Paphos. The decline in property sales has also affected state revenues with earnings from capital gains tax falling by 18% a year.

Furthermore, banks, which already screen property investors, developers and non-Cypriots who want to borrow, have raised the level of collateral required and changed payment terms. The lenders are also taking risk into account and the popular coastal resorts are regarded as more of a risk at present as that is where the steepest price falls are being found.

Nicosia most active

Nicosia remained the most active in terms of property contracts sold during the first seven months of the year, registering a 26% year-on-year increase in property contracts followed by Limassol (up 18%) and the Famagusta area, up 12%. The districts of Larnaca and Paphos were the laggers recording increases of 6% and 10%, respectively.

Despite a decline in property sale contracts in July, which fell by 11.6% y-o-y to 797 from 902 property deals concluded in July 2009 and by 7.8% compared to the June 2010 figures, the Land Registry Department revealed that overall, the trend for 2010 remains upward.

The negative performance in the number of sale contracts in July is a direct result of the reversal in the positive trend from foreign sales which ended the period at -0.2% y-o-y (vs.+9.6% y-o-y in 1H 2010). Demand for locals however, decelerated from +26.8% in 1H 2010 to 21.0% for the first seven months of the year.

The biggest property deal in Nicosia is the purchase of prime land by Hayasa Properties, a Lebanese-Armenian group which bought a plot on the corner of Stassikratous/Mnassiadou streets for €18 million in addition to another plot purchased next to Pralina Café for €5.5 million.

For the period January – July 2010, the number of property sale contracts increased compared to the same period in 2009 by 15.8%.

Is it time to buy in Cyprus

Readers' comments

Comments on this article are no longer being accepted.

  • Norman Styles says:

    The following comment made by Anthonis Loizou is simply not true. Why do the Cypriots continue to lie all the time when the truth is self evident?

    “Strangely enough, this phenomenon does not seem to concern other foreign buyers in other areas, while local Cypriot buyers are not at all worried with the problem,” he added.

    I have been a Real Estate agent in Cyprus for the past 10 years and have dealt with many Cypriot buyers. I can assure Mr Loizou that everyone including Cypriots are concerned about the property fraud, illegal practice, corruption, nepotism, criminal injustice and downright arrogance of those Cypriots concerned.

    When will they ever learn with the attitude of the minister of the interior, I quote. Mr Sylikiotis and the Attorney General got insulted, perhaps because the complaints came from a bunch of “bloody foreigners”

    They accepted our money with the standard false smile but this is how they really are, what arrogance!!

  • Peter says:

    And prices will continue to drop as the would be-buyers stay away from Cyprus.

    Not until the problem with the title deeds is sorted, and that will only be when the EU steps in will the buyers return.

    The word is out buy in Cyprus and you will lose your money to the developer or bank.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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